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.
Senator Joseph Lieberman

Joseph Lieberman (ID-CT)

The "Improving Access to Mainstream Financial Institutions Act of 2008" has been introduced in the Senate by Daniel K. Akaka (D-HI). The Act creates two taxpayer funded grant programs within the Department of the Treasury intended to provide consumers with alternatives to payday loans.

The bill is cosponsored by Senators Chuck Schumer (D-NY), Joseph Lieberman (ID-CT), and Daniel Inouye (D-HI) and comes pre-endorsed by The National Association of Federal Credit Unions among others.

In a written statement supporting the Act, Senator Lieberman described the presence Rent to Own stores as a "sad reality."

"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," Lieberman said.

The first taxpayer funded program authorizes grants to "provide consumers with a lower cost, short term alternative to payday loans by encouraging the development of affordable payday loan alternatives at mainstream financial institutions." Loans extended to consumers under the grant would be subject to the annual percentage rate set by the National Credit Union Administration's (NCUA) Loan Interest Rates, currently capped at 18 percent.

The Credit Union industry has been leading the charge to ban short term lending in some jurisdictions. Credit Unions stand to gain millions in deposits in addition to the ability to write risk free, government sponsored short-term loans.

The second grant program is intended to "help low and moderate income unbanked individuals establish bank or credit union accounts, providing consumers with alternatives to rapid refund loans, check cashing services, and lower cost remittances."

"A bill like this has been a long time coming," Chuck Schumer added.

Senator Schumer's anti-rent-to-own-industry bill, the Rent-To-Own Reform Act of 2007 introduced in May, 2007, has no cosponsors.