Political Horizons: Bills from both houses aim to rein in payday loans

The image of efforts to rein in payday lending, so far, has been the testimonials of working folk telling church gatherings how they took out a short-term loan of a couple hundred bucks and ended up in a sinkhole of debt.

The industry responded in Louisiana with a couple dozen lobbyists telling legislators that significant changes could collapse a business with more stores than Starbucks.

Starting Monday, the new face of the debate will be a representative and a senator, each of whom will use their positions as committee chairmen to consider their specific bills on this issue.

Both are in the building trades: State Sen. Ben Nevers is an electrical contractor from Bogalusa. State Rep. Erich Ponti is a general contractor from Baton Rouge.

Statistically, at least, their districts are similar — about 69 percent white — but also different.

Ponti’s south Baton Rouge district is full of single-story residences and McMansions of a younger, more mobile constituency. Nevers’ rural constituents live between the northshore suburbs and the Mississippi state line and practice politics that come more from Protestant pulpits than from talk radio.

Ponti, a 48-year-old Republican, is perhaps best known for constructing a redistricting plan that gave enough concessions to Democrats that they gave up trying to block Republicans from redrawing congressional and legislative district lines, ensuring GOP domination in the next decade. He plans to set his bill for a Monday hearing.

Nevers, a 67-year-old Democrat, is perhaps best remembered for sponsoring the legislation that carried the Bible story of God’s creation of man into public school science classes. He plans to set his bill for a Tuesday hearing.

Nevers met last week with about 20 industry lobbyists in a conference room so full of people that not everyone got to sit. The lobbyists argued for protecting a business that has 1,730 licensed lenders and employs about 6,200 people.

“I look at it from a different perspective,” Nevers said. “I’ve met with AARP and the churches, and they’re interested in the issue because they feel many citizens, many of the more vulnerable citizens whom they pastor, are being taken advantage of.”

A 30-day $100 loan from Dr. Check in Baton Rouge carries a $20 finance charge and a $5 document fee, for a total of $125. That would calculate out to an annual percentage rate of almost 200 percent.

True, the payday loan is only supposed to be for 14 days or 30 days, while the APR is for 365, Nevers said. But what often happens is another loan is taken out to cover the costs of the first loan — payday lenders demand a postdated check for the full amount to hold as collateral — then another short-term loan is taken to cover the now increased costs of the second loan, prompting a cycle of debt.

Nevers’ Senate Bill 84 would limit the annual percentage rate to 36 percent and would forbid firms from holding a personal, post-dated check from the customer as collateral.

Mary Parker, the office manager at Dr. Check, says limiting the APR to 36 percent would mean the $100 loan would cost about $1.38 and, with a $5 document fee, would have a total of about $107.

“That’s not enough to pay overhead,” Parker said.

No bank or credit union is willing to make a loan that small for that short of a period, so if Dr. Check and other payday loan establishments go out of business, people will have nowhere to turn. “It would hurt the consumer,” she said of Nevers’ SB84.

On the east side the State Capitol, Ponti predicted his weekend would be spent in negotiation.

Ponti’s goal is to insert sweeping compromise language into House Bill 766 and hear the measure on Monday. He’s hoping the industry will agree to a number of concessions, including doing away with late fees and corralling other fees.

Good luck with that, says state Rep. Ted James, whose House Bill 239 is similar to Nevers’ measure.

Any compromise that doesn’t include a cap on interest rates and a ban on postdated checks is nothing but a sop for industry, said James, D-Baton Rouge. And based on his conversations with lobbyists, that’s the direction the negotiations are going.

“It’s going to be a Band-Aid, not a solution,” James said.

Mark Ballard is editor of The Advocate Capitol news bureau. His email address is mballard@theadvocate.com