An array of public interest groups told a legislative panel yesterday that check-cashing firms in Maryland should be prohibited from making short-term, high-interest loans.
"Citizens need loans, not loan sharking," Scott Cooper, an organizer with Baltimoreans United in Leadership Development, told members of the House Commerce and Government Matters Committee.
The hearing in Annapolis on legislative proposals to regulate check-cashing companies focused mostly on a practice widely known as "payday lending" -- accepting post-dated checks from people who essentially are allowed to borrow against their next paycheck.
The fees on such transactions often work out to an annual interest rate of 500 percent or more, which critics say exploits the working poor and puts them on a treadmill of ever-increasing debt.
Check cashers say they are providing a needed service. They say it is not fair to look at the fees in annual terms because the transactions are usually limited to two weeks and are not intended to be long-term loans.
Del. Elizabeth Bobo, a Howard County Democrat, told other members of the legislative panel that she intends to introduce legislation early next year that would ban check cashers from making payday loans.
"There are some horror stories out there," Bobo said. "My plan at this time is to follow New York and New Jersey and prohibit payday loans. I can't find any way to allow them that does not allow for a lot of potential for abuse."
Representatives from BUILD, the Maryland Public Interest Research Group and the Maryland Center for Community Development backed Bobo.