Teilhet Stands Up to Predatory Lenders

Today, Rep. Rob Teilhet (D-Smyrna) introduced legislation requiring full disclosure from marketers of high interest "refund anticipation" loans. Teilhet says, "For too long, Georgia and other states have looked the other way as predatory lenders have deceived taxpayers into loans soaked with extravagant fees and triple digit interest rates."

This legislation is timely and dead on the money. Consumer organizations have found that the biggest market for these loans is the working poor, 56% (seven million families) of whom are eligible for Earned Income Tax Credit enabling them to receive a refund whether or not they have paid any income tax. The NCLC and the Consumer Federation of America have released their 2006 report on these loans. Through 2004, 12.38 million taxpayers got refund loans during tax season. These consumers paid almost $1.24 billion in loan fees, and another $360 million in administrative, electronic filing and application fees.

Taxpayers who seek these loans are often living hand-to-mouth, just trying to keep the wolf away from the door. They feel trapped and desperate, forced to make difficult choices between things like rent and heat in the winter. They often face challenges with language, education and literacy that makes tax forms hard to manage and fine print on loan documents impossible. Often, they don't need their money now-they needed it yesterday or last month. This is a vulnerable population.

While many are eligible to receive EITC, the paperwork to receive the EITC is complicated making it more likely that the consumer will have to hire a tax preparer. Many are unaware of free community services that will assist them with tax preparation, and many do not have bank accounts. Conveniently, a refund anticipation loan creates a one-time-use bank account for the refund, and the lender takes his portion before sending the balance to the consumer.

Like payday lending, this scheme is predatory and targets a vulnerable population that can ill afford the fees and interest rates that often sore to over 300%. Teilhet is right on target with this legislation-if we're going to allow these people to do business in Georgia-at the very least they ought to have to jump through some hoops to make sure consumers know what they're buying-and what it 's going to cost them.

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This is Important: Action Needed Now

With a 67% increase in the foreclosure rate from 2005 to 2006, Georgia has certainly felt the weight of the crash of the sub-prime lending market. As creditors aggressively marketed sub-prime loans, especially in minority communities, for many, the American Dream was transformed into the American Nightmare.

Now, Georgia's congressional delegation has an opportunity to do something to help protect consumers. HR 3915, The Mortgage Reform and Anti-Predatory Lending Act of 2007 is currently in committee, but word is, a vote could be just around the corner. Surely, we can count on our elected leaders to support this important legislation. Certainly, none of our Democratic members-not Barrow, Marshall or Bishop-would carry an amendment for the lending industry to gut key, common-sense, consumer protections in the bill-like the requirement that creditors be required to determine, based on verified, documented information, that a consumer has a reasonable ability to repay the loan. Surely not.

But, stranger things have happened. After all, Marshall managed to be the lone Democrat opposing even the revised version of SCHIP. So, please drop your congressman an email, TONIGHT, and tell him to vote "yes" on HR 3915 and to leave the key consumer protections in place. This is critical and time-sensitive. The Center for Responsible Lending makes acting easy.

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