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Senators rewrite payday lending restriction bill
Question of the Day
BATON ROUGE, La. (AP) - A person would be limited to 10 short-term loans a year from payday lenders under a bill that received the backing of a Senate judiciary committee Tuesday after heavy reworking.
Originally, the measure by Sen. Ben Nevers, D-Bogalusa, sought to cap the fees that can be charged by the storefront lenders at an interest rate of 36 percent annually.
Nevers said he wanted to stop the debt cycle that he said was caused by payday loans, which carry short terms and high interest rates, leading customers to borrow more. He said 80 percent of payday loans are followed by another in 14 days.
“It is deeply flawed because it traps people into debt,” he said.
But Sen. Danny Martiny, R-Kenner, said Nevers‘ original bill went too far and would shut down the payday lending industry in Louisiana. Martiny proposed the change to a cap of 10 loans annually. The amendment also calls for a database that would allow the Office of Financial Institutions to track payday lending transactions.
Nevers said the original bill would have worked better than the amended one, but he said of the reworked bill, “I think it moves in the right direction.”
He planned to file another bill Tuesday that would put payday lenders under the regulation of the Louisiana loansharking law, which puts a 45 percent cap on the annual interest rate.
Supporters of Nevers‘ original bill were unhappy with the changes.
Andrew Muhl, director of advocacy for AARP Louisiana, said taking out 10 payday loans a year still creates a cycle of debt. He wants a cap on the annual interest rate.
Broderick Bagert, representing the organization Together Louisiana, said the cap should be dropped to five loans per year.
Martiny’s amendment also drew criticism from the payday lending industry.
Bernard Gibbs, president of Paycheck Loans of Louisiana, said only a borrower should determine how many loans they need and that lawmakers need to focus on putting competition back into the industry.
“There are better ways to do it,” he said.
The Senate committee heard from individuals who fell into financial hardship after going to a payday lender, including Thelma Fleming. She paid about $7,000 in three years after taking out five payday loans.
“Not only did payday lending trap me physically, it trapped me mentally,” Fleming said.
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