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Financial Services Issues: A Consumer’s Perspective

Testimony of Jean Ann Fox, Director of Consumer Protection Consumer Federation of America
“Financial Services Issues: A Consumer’s Perspective”
On Behalf of the Consumer Federation of America, National Consumer Law Center, Center for Responsible Lending, Consumers Union and the U.S. Public Interest Research Group Before the House Committee on Financial Services Subcommittee on Financial Institutions and Consumer Credit
September 15, 2004

In less than a decade, the quick cash credit market has become big business, costing financially vulnerable consumers billions in triple digit interest rates and fees. Excluding credit cards and cash advances on credit cards, new and risky methods of borrowing a few hundred dollars for a few weeks have become as widespread as they are controversial. These new products include payday loans, bounce loans which banks call “courtesy overdraft” programs, and tax refund loans. These three products target cash strapped consumers who have trouble making ends meet between paydays. Borrowers pay triple digit interest rates for money that must be repaid in full on the borrower’s next payday, or when the tax refund is deposited in two weeks or less by the IRS. Consumers can also spend a lot of money very fast on the array of new plastic payment cards that are being offered, such as payroll cards and pre-paid debit cards. Unfortunately, federal requirements regarding disclosures, error resolution procedures, and liability limits for credit and debit products have not been updated to explicitly cover these types of products.
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