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The
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U. S. Senator Sherrod Brown
Giving Ohioans
an Alternative to High Interest Payday Loans
When unexpected costs arise before tax returns come in, workers are
faced with a dilemma and many workers turn to predatory payday loans to
make ends meet. These loans – which can carry hidden fees and can have
annual interest rates more than 500 percent – often trap borrowers in a
cycle of debt. There are more payday lending stores in the United
States than there are McDonald’s and Starbucks combined. These
operations are thriving at the expense of low-income Americans.
Come tax time, many of these same Americans have money waiting for them
in the U.S. Treasury through the Earned Income Tax Credit (EITC), one
of the most effective anti-poverty programs working to help Americans
today. The EITC provides tax relief for low-income workers, encouraging
work while reducing poverty. In 2012, more than 940,000 Ohioans
received more than $2.1 billion worth of tax credits through the EITC.
The credit serves as a lifeline that allows families to pay for
necessities they might not otherwise be able to afford.
With an average EITC in Ohio of more than $2300 and the average payday
loan being less than $400, it’s clear that many Ohioans would prefer to
get the refund owed to them early as opposed to paying exorbitant fees.
We need to provide an alternative to payday loans so that people in
need can avoid paying hundreds in additional fees and interest.
Three-quarters of payday loan borrowers are employed, and many of those
workers earn average salaries that could make them eligible for the
EITC. My plan, the Early Refund EITC Program, would give these workers
an interest-free avenue to access emergency funds.
The Early Refund EITC Program would allow workers to obtain an advance
upon a portion of their EITC, helping them to avoid taking out a payday
loan. The advance – which is capped at $500 so workers can retain the
majority of their EITC funds after they file their tax returns – will
only be available to claim in the second half of the year, after
workers have already demonstrated their eligibility for the EITC.
Family priorities like groceries, dentist appointments, and utilities
shouldn’t go unmet and Ohioans shouldn't be trapped with a lifetime of
debt from predatory loans. This program will help protect low-income
workers, allowing them to better provide for themselves and their
children.
Sincerely,
Sherrod Brown
U.S. Senator
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