Senators Akaka, Schumer, Lieberman, and Inouye introduced legislation that would help low income individuals obtain bank accounts as well as provide grants to banks and credit unions to offer alternatives to payday loans.

The Payday Pundit fully supports programs that help people obtain bank accounts and financial knowledge.  But in making their arguments against payday lending the sponsoring senators continue to misrepresent payday lenders:

Senator Lieberman said: “At a time of rapid innovation in the financial services industry, it is discouraging that a so many Americans remain disconnected from the mainstream system of banking and finance.  The sad reality is that in many low-income neighborhoods, the primary source for financial services is storefront check cashers, rent-to-own shops, money transfer operators, and payday lenders charging predatory interest rates.

If Senator Lieberman read the the Payday Pundit he’d know that “unbanked” consumers are not eligible for payday loans.  Additionally, while the legislation caps bank and credit union short term loans at 18%, it says nothing about the loan origination fees, maintenance fees, and any other number of fees that are normally charged.  There has yet to be a description of one of these bank or credit union programs that offers full disclosure about all the fees involved.

The question that occurs to the Payday Pundit is: if mandating an 18 or 36% APR for these short term loans is so “reasonable,” why do all these banks and credit unions need government money to offer them?