Earlier this year, we blogged about the WSJ piece that revealed the extent that the Congressional Hispanic Caucus was involved with subprime lenders in promoting its Hogar Program, and we followed up that post with the Great American Mortgage Scam and the Latino Community, parts I and II. Our fearless leaders have certainly maintained some cozy relationships with the lending industry. Congressman Baca, in particular, has taken some donations from an entity that was promoting a seller-financed down-payment program, which has now been outlawed.

Now Congressman Baca has introduced a bill that is considered friendly to the payday lending industry in that it will open the door for these usury charging entities to do business in states that currently make payday lending practices difficult or impossible. Baca’s proposal would also allow online lenders to charge higher fees than those in fixed locations.

Rep. Gutierrez has also been in the news for now wanting to regulate payday lenders. At one point, he was in favor of banning them altogether, but even he has been bought to a certain extent by the intense lobbying efforts of these lenders. According to the AP:

“Indeed, the payday lending industry is strenuously resisting Gutierrez’s measure, which it says would devastate its business. The measure would cap the annual interest rate for a payday loan at 391 percent, ban so-called “rollovers” — where a borrower who can’t afford to pay off the loan essentially renews it and pays large fees — and prevent lenders from suing borrowers or docking their wages to collect the debt.”

Some consumer advocates feel that Gutierrez’s plan won’t do much, as it would give federal legitimacy to the practice.

I wish that our leaders would focus more on financial education and working to create jobs that pay livable wages so that we don’t have to live paycheck to paycheck instead of providing access to our already vulnerable financial situation. The Center for Responsible Lending reports that predatory payday lending costs American families $4.2 billion annually. We know from experience that payday lending outlets tend to be in poor, minority neighborhoods.  The Center for Responsible Lending is also opposed to key provisions of HR 1214, the Payday Loan Reform Act, because:

“they do not address the fundamental problems with payday lending that trap borrowers in debt: the high cost of the short-term credit and the requirement that the borrower pay back the loan with a single paycheck. Instead, HR 1214 lets payday lenders continue to charge annual interest rates of 391 percent for a typical payday loan, and includes measures that have proven to be ineffective in numerous states in stopping the debt trap caused by the terms of payday loans.”

As long as our leaders like Joe Baca and Luis Gutierrez accept donations from this predatory industry, we can expect them to create loopholes for their lending friends. Gutierrez has accepted $4,600 from the Online Lenders Alliance, and the group has also hosted a fundraiser for Baca. We can exercise our opinion about these practices by calling Baca and Gutierrez‘s offices. If we hold them accountable and offer alternatives to fund them (i.e. through grassroots efforts), we can more reasonably expect these Congressmen to better represent our interests.

Photo Credit: Portrait Joe Baca from his website