July 16, 2009

Markell Signs Bill to Combat Predatory Lending

WILMINGTON -- Gov. Jack Markell signed legislation Thursday that will help protect Delawareans from the scourge of predatory lending.

Markell signed the measure -- Senate Bill 108 -- during a news conference at the West End Neighborhood House to announce the organization’s “Loans Plus” initiative.

"Too many Delaware families are falling victim to financial predators and seeing their economic opportunity crumble beneath a mountain of high interest rates,” Markell said. “I am proud to be signing legislation that stands up for Delawareans by standing up to predatory lenders.”

The new law, which was one of the administration's legislative priorities, requires that any payday lender who wishes to set up shop in Delaware pay a surcharge of $1,500 per location in addition to the existing licensing fee.  The fee will be used to fund financial literacy education and promotion of low-interest community-based loan programs.  The Governor’s plan also creates a similar surcharge for title lenders and goes further in protecting families by helping to ensure that a consumer’s debt exposure on a title loan is limited to the value of the vehicle itself.

"This is a real bread and butter issue for a lot of people who rely on these loans from time to time and don't always know what they're getting into," said Sen. Robert I. Marshall, D-Wilmington West, who sponsored the bill. "This provides some additional protection and provides some education to consumers. Hopefully, those in need of one of these loans will use the information and be better-educated when they apply to borrow the money."

“Payday lending is a practice that while essential in some cases, presents problems for some of those people who use these cash advances,” said Rep. Short, the lead House sponsor of the bill. “Requiring these lenders to obtain a state license will help ensure that the businesses that set up are held accountable and are operating in good faith. Using the revenue generated by the fee to fund financial literacy and loan programs is a great way to help the very people who use cash advances, educating them so that they can better manage their finances.”

The new law won praise from key community groups that help Delawareans take control of their finances.

 "It's crucial that Delawareans understand the effects a high-interest loan will have on their current and future financial status," said Barbara Reed, director of the Housing and Financial Management Program at West End Neighborhood House.

Ronni Cohen, executive director of the Delaware Financial Literacy Institute, added: "I’m especially pleased that revenues from the fees associated with SB108 are earmarked for financial education.  This is particularly critical in today’s economy."