Supporters of payday loan limits point to new data
BATON ROUGE (AP) — Organizations seeking to toughen regulations on payday loans Monday pointed to a report by the Louisiana Office of Financial Institutions that shows state residents shelled out about $146 million in fees and interest on the loans last year.
Advocates for payday loan reform used the report at a House Commerce Committee hearing to back Rep. Ted James’ proposal to cap payday loans’ annual interest rate at 36 percent.
They argued the report shows how payday lenders, which offer short-term loans with high interest rates, trap people in to debt.
“This is a long vicious cycle of debt,” said James, D-Baton Rouge.
But that didn’t sway the committee, which voted 10-8 against James’ proposal.
Opponents of the measure said it would shut down the storefront lending industry in Louisiana. They also argued that an annual percentage rate should not apply to payday loans since they are supposed to be short-term.
“It’s illogical to apply APR to these loans,” Troy McCullen, of Louisiana Cash Advance, said.
McCullen and other payday loan industry representatives spoke against the bill at the hearing.
Rep. Hunter Greene, R-Baton Rouge, said nobody forces borrowers to turn to payday lenders and they are responsible for understanding how the loans work.
Supporters of the bill said borrowers do not have a choice in many cases because they are in a desperate state made more desperate by payday loans.
The committee heard testimony from several supporters, including representatives from Together Louisiana, AARP Louisiana, the left-leaning Louisiana Budget Project, the Louisiana Conference of Catholic Bishops and individuals who have had personal experiences with payday loan debt.
AARP Louisiana released a statement after the hearing expressing disappointment in the ruling.
“Paying off a payday loan with over 400 percent interest is unfair,” the statement said.
The vote broke down on party lines, with Republicans voting against James’ bill and Democrats voting for it.
Voting against the proposal were Reps. Greene; Erich Ponti, R-Baton Rouge; Kirk Talbot, R-River Ridge; Stuart Bishop, R-Lafayette; Thomas Carmody, R-Shreveport; Lance Harris, R-Alexandria; Kenneth Havard, R-Jackson; Paul Hollis, R-Covington; John Morris, R-Monroe; and Stephen Pugh, R-Ponchatoula.
Representatives who supported the bill were Kenny Cox, D-Natchitoches; Herbert Dixon, D-Alexandria; Marcus Hunter, D-Monroe; Katrina Jackson, D-Monroe; Stephen Ortego, D-Carencro; Vincent Pierre, D-Lafayette; Edward Price, D-Gonzales; and Eugene Reynolds, D-Minden.
While the committee rejected James’ interest cap proposal, it did approve Jackson’s bill asking that payday lenders give credit report agencies their borrowers’ positive credit history.
Monday’s vote doesn’t end the debate. Other proposals on the House and Senate floor would add other types of restrictions to payday lending. James plans to amend bills that deal with payday lending on the House floor to make sure they address the debt cycle.
“It’s a long way from finished,” he said.