Jim Beam Column: Payday Loan Bill Needs Veto – American Press

From time to time, Louisiana legislators have come to the aid of those who issue so-called payday loans. Sen. Rick Ward, R-Port Allen, is this year’s champion with Senate Bill 381.

The bill, which both houses narrowly passed, would limit financing costs to 100 percent of the original loan amount. That means lenders could charge up to $1,500 in fees for a $1,500 loan, or a $3,000 total repayment, according to The Advocate.

The senator said his Louisiana Credit Access Loan Act would help paycheck-to-paycheck state residents make ends meet when faced with unexpectedly high expenses.

Under current law, lenders can offer a loan of up to $350, which is due on the borrower’s next payday. The maximum amount that the lender can receive per loan is $55. Ward’s bill doesn’t change that.

Ward sponsored another payday loan bill in 2018. It stated that the term of the loan could not be less than three months and not more than 12 months. The loan amount could be no less than $500 and no more than $875. The bill passed the Senate 20-17 but died in the House Commerce Committee.

I wrote in a June 3, 1999 column about a Bossier City woman who received one of these loans. She needed $200 for an emergency trip out of town and took out a two-week loan. The maximum they were lending at the time was $201 and had to be paid back within 14 days.

When a customer needed to borrow that $201, they had to deposit a check for $246 to cover the principal and $15 in interest. The other $30 was for documentation and build fees. That’s an annual return of more than 580 percent.

“It was a little high,” the borrower said, “but if you need it, you need it.”

The Associated Press reported that in 1992 there were about 30 payday loan companies in the state. This number rose to 455 by 1998 and to 489 by the end of 1999.

Foster Campbell, a current member of the Louisiana Public Service Commission, was a state senator in 1999. He said: “Since 1992 we have opened 500 of these businesses and none of them have failed. I’ve never heard of such a statistic. But the reason they haven’t is because they abuse people by charging outrageous interest rates.”

OK, getting back to Ward’s bill, which passed the House 54-35, one vote ahead of the 53 needed. The Senate vote was 20-14, the exact majority it needed.

Republican Sens. Mark Abraham of Lake Charles and Mike Reese of Leesville voted in favor of Ward’s bill. Sen. Jeremy Stine, R-Lake Charles, voted against. Sen. Heather Cloud, R-Turkey Creek, has been reported as absent.

GOP Reps. Ryan Bourriaque of Grand Lake, Dewith Carrier of Oakdale, Troy Romero of Jennings and Phillip Tarver of Lake Charles voted in favor of the bill. Representative Wilford Carter, D-Lake Charles; Charles Owen, R-Rosepine, and Rodney Schamerhorn, R-Hornbeck voted against. Rep. Brett Geymann, R-Moss Bluff, was reported absent.

The bill now awaits action from Governor John Bel Edwards. Lenders would make most of their money with a monthly maintenance fee of up to 13 percent of the original loan amount.

Alex Horowitz, a consumer finance researcher at The Pew Charitable Trusts, told The Advocate he had never seen a fee this high. He said the bill would expose Louisiana consumers to financial harm rather than create an affordable credit market. According to Horowitz, seven of the 12 largest banks in the country have started or announced programs to provide small loans to customers.

Kenneth Pickering twice served as chief banking regulator in Louisiana. He said he has no idea what the maintenance fee even covers. “Once a loan is on the books, there’s nothing left to maintain,” he said. Pickering calls it more interest.

Stanley Dameron, commissioner of the Office of Financial Institutions, said: “Some of the people who would apply for these loans might not qualify at your bank, but they certainly would qualify at a credit union or financial firm.”

Jessica Sharon of Pelican State Credit Union told lawmakers that credit unions were formed specifically to help people of modest means.

Even an official at a state association that represents payday lenders said there was no need for Ward’s new product. He said the loans are already available in Louisiana at a fraction of the cost. “This is greed and arrogance at the highest level,” he said.

Ward’s bill is definitely a good candidate for a governor’s veto.

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