April 3, 2013 Senator Gratwick, Representative Treat and Members of the Insurance and Financial Services Committee, on behalf

of our more than 230,000 members 50+ in Maine, and all working families, AARP writes in opposition to LD 602. Maine families are finding it hard enough to make ends meet and this legislation would only add to this burden while increasing profits of the loan industry. A recent study by Demos and AARPs Public Policy Institute found that low- and middleincome Americans 50+ are carrying an average of $8,278 in debt. This compares to people under 50 who owed about $2,000 less or an average of $6,256 in debt. You might ask why this is the case. Older consumers often have longer credit histories, more financial responsibilities for children as well as aging parents, and have felt their own impact from the Great Recession (loss of employment, kids moving back in or covering kids, etc.). The Employee Benefit Research Institute (EBRI) reported recently that total debt payments as a portion of income for families headed by people 75 or older had increased to 7.1 percent in 2010, from 4.5 percent in 2007. i Older Americans are already struggling to make ends meet. Small loan interest rates in Maine are already too high. With families struggling, making these loans more expensive for families will be a disaster for Maine consumers. Consumer finance companies can already charge up to 30% annual interest on the smallest of these loans. They can also charge about 18% annual interest on loans up to $10,000. This is more than enough interest for struggling families to pay. Why would we want to punish them more? State regulators have studied the industry in depth and concluded that there is no need for higher rates or fees. ii These changes may increase profits for the companies, but shouldnt happen on the backs of hard working Maine people. Based on experience in North Carolina, high interest could strip an estimated $50-70 million from Maine consumers every year. And by making these loans more expensive, some borrowers who qualify now would no longer qualify under the higher rate structure. If people cant afford the loans now, this change would price them out of the credit market completely. Credit should not be more expensive than its worth. We ask that you consider opposing this consumer un-friendly legislation.

EBRIs analysis is published in the February EBRI Notes, Debt of the Elderly and Near Elderly, 19922010, using the Federal Reserve Boards Survey of Consumer Finances (SCF).
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ii

N.C. Commissioner of Banks, The Consumer Finance Act: Report and Recommend ations to the 2011 General Assembly. February 2011. Over the past 12 years, the majority of licensees have been profitable, and the aggregate industry net worth more than doubled between 1998 and 2009.