Save My Pawn ShopApril 12, 2009 - by Donny Shaw
Here’s a new campaign against a bill in Congress that would cap interest rates on all loans at 36 percent — SaveMyPawnShop.com.
The bill they are fighting is called the Protecting Consumers from Unreasonable Credit Rates Act. According to a press release from Sen. Dubrin (D-IL), the bill’s sponsor, it would apply a 36% cap to all open-end and closed-end consumer credit transactions, including mortgages, car loans, credit cards, overdraft loans, car title loans, refund anticipation loans, and payday loans. The high-interest, short-term loans that pawnbrokers give out, backed by undervalued jewelry, camera, instruments and the like, would be covered under the bill.
Here is pawn shop owner John Hoying defending the industry, via WHSV in Virginia:
“You close a pawn shop, people won’t be able to go out and buy their medications, won’t be able to pay their copay for the doctors that they have to pay for their children who are sick,” says Hoying. “I’ve had people pawn items so that they could get diapers and baby formula.”
Obviously, the pawn shops face a big challenge in mounting a defense of their business model as a reasonable solution to poverty and lapses in healthcare coverage. But before you discredit their ability to defend high-interest loans to low-income individuals, read my post below on how the payday loan industry, which is generally regarded with even more disdain than pawn shops, has gotten members of Congress to back the idea of a 390% APR. That’s not a typo — Rep. Luis Gutiérrez [D, IL-4] is actually pushing a bill that would levy a three hundred and ninety percent APR on typical payday loan borrowers.