- Associated Press - Tuesday, February 21, 2017

LINCOLN, Neb. (AP) - Opponents of payday loans urged Nebraska lawmakers on Tuesday to reject a bill that would allow payday lenders to offer larger loans with high interest rates, while lenders argued against new regulations they said would kill their business.

Omaha Sens. Tony Vargas and Lou Ann Linehan sponsored a bill modeled after a 2010 Colorado law that would cap annual interest rates at 36 percent, limit payments to 5 percent of monthly gross income and limit total interest and fees to 50 percent of the principal balance - meaning the most someone would pay to borrow $500 is $750.

“Our payday lending law isn’t currently working for Nebraskans and isn’t currently working for our economy,” Vargas said.

Nebraska law doesn’t allow users to roll their loans over if they can’t pay, but several borrowers told the committee their lenders pressured them to do so anyway. A report released Tuesday by the progressive nonprofit organization Nebraska Appleseed found the Department of Banking and Commerce addressed more than 275 violations at payday lenders between 2010 and 2015, and many of these were connected to illegally rolling over loans.

Bellevue resident Glenda Wood told the committee she and her husband ended up paying about $10,000 in fees over eight years after taking out a $500 loan for new tires in 2006. They renewed the loan every two weeks because they couldn’t pay the lump sum.



Twenty supporters of Vargas’s bill, including borrowers, Christian leaders and advocates for veterans, low-income Nebraskans and retirees, spoke to the committee, which appeared unlikely to advance the measure.

Sen. Paul Schumacher, a member of the committee, said an alternative to government regulation of payday loans is “good-guy lenders” opening stores that charge lower fees.

The government already created the payday loan problem with legislation permitting it decades ago, said Nick Bourke of Pew Charitable Trusts. Vargas’s bill simply would change the existing law to help borrowers with low credit scores who don’t qualify for traditional installment loans, he said.

“When they go and borrow $400 and about $475 is due in two weeks, that means the borrower essentially loses one-third of their next paycheck,” he said.

A measure brought to Sen. Joni Craighead of Omaha by an industry lobbyist would keep payday lending as is and create a new type of loan with longer terms and slightly lower interest rates. These loans could be up to $2,500 paid back within two years with 18 percent monthly interest, meaning paying back $500 over one year would cost about $1,250.

“This flexible credit loan is designed to fill that gap for consumers who need a loan longer than a few weeks but shorter than a few years,” Craighead said.

Those loans would be offered through payday lending providers, who supported Craighead’s measure and opposed Vargas’s. After Colorado’s law passed in 2010, the payday lending industry in the state consolidated and more than half of the payday lenders went out of business.

“I guess when it’s not your job it’s consolidation,” said Brad Hill, a payday lender and president of the Nebraska Financial Services Association. “When it is your job, it’s doomsday. It’s Armageddon for our industry.”

__

Follow Julia Shumway on Twitter at https://twitter.com/JMShumway

Sign up for Daily Newsletters

Manage Newsletters

Copyright © 2021 The Washington Times, LLC.

Please read our comment policy before commenting.

 

Click to Read More and View Comments

Click to Hide