NY Daily News: Check cashing stores push Albany lawmakers to allow 200% APR loans

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NY Daily News

By Daniel Beekman

Check-cash stores across the city want to offer a new kind of loan that would charge borrowers the equivalent of up to 200% interest, critics say — eight times the current limit set by state law.

Check-cash stores across the city want to offer a new kind of loan that would charge borrowers the equivalent of up to 200% interest, critics say — eight times the current limit set by state law.

The stores are leaning on state lawmakers to legalize the loans, and they have have given hundreds of thousands of dollars in campaign contributions hoping their case will be heard.

On Tuesday, their trade group, the Financial Service Centers of New York, organized an “Albany Blitz” to sway lawmakers.

But opponents — including the Bloomberg administration — charge that the loans represent predatory lending.

“This is wolf-in-sheep’s-clothing legislation,” said city Department of Consumer Affairs Commissioner Jonathan Mintz.

Check-cash stores insist they want to help poor New Yorkers by offering them a better option than the payday loans that are available online.

The proposed legislation, the Short-Term Financial Services Loan Act, would let the operations make 90- to 180-day loans of $300 to $2,000.

Stephen Altobelli, the trade group’s spokesman, said it would create a product “that is transparent, is regulated (and) is offered by responsible businesses.”

But critics say the legislation would allow check-cash stores to bypass state usury laws and charge triple-digit annual percentage rates in interest and fees.

For a $300 loan, the interest and fees could total an APR of over 200%, and for a $2,000 loan, more like 50%, said Sarah Ludwig of Neighborhood Economic Development Advocacy Project.

Mintz said campaign contributions are “the only thing that could possibly explain” why lawmakers are backing the bill. “Legislators have a duty to protect New Yorkers in need — not offer them up to the highest bidder,” the consumer affairs czar said.

From 2008 to 2013, New York Check PAC, check-cash stores and associated individuals have made more than $480,000 in contributions to state campaigns and political parties, a review of state Board of Election records shows.

Sen. Jeffrey Klein (D-Bronx) was the main sponsor of an earlier version of the bill and is a co-sponsor of the current version. He piled up nearly $50,000 in check cash-related contributions from 2008 to 2013, records show.

“Contributions do not impact legislative decision-making,” his spokesman, Eric Soufer, said.

State Assemblyman Denny Farrell (D-Manhattan), a co-sponsor of the bill, received more than $30,000. The main sponsor of the bill, Bronx Democratic Chairman and state Assemblyman Carl Heastie, oversees the Bronx Democratic County Committee, which received $10,000.

“We’re trying to give people a safer option,” Heastie said.

A spokesman for Assembly Speaker Sheldon Silver said Silver does not support the bill.