State Sen. Ben Nevers wants to send payday lenders who abuse borrowers to prison, and he’ll file legislation before next week to do just that.
“It’s time we stopped this practice,” Nevers told a cheering crowd on the State Capitol steps on Tuesday.
For his second bill on the issue, which he said would be filed by next week’s deadline, Nevers said he is looking at loansharking statutes.
Nevers already is sponsoring legislation, Senate Bill 84, along with state Sens. Sharon Broome, D-Baton Rouge, and Robert Adley, R-Benton, that would cap annual interest rates and fees for payday lending at 36 percent.
SB84, which will likely be heard in committee Tuesday, is one of several measures that have been filed this session to regulate the practice.
Louisiana’s loansharking law states that interest rates “exceeding 45 percent per annum or the equivalent rate” constitutes “the crime of loansharking.” The felony carries penalties of fines up to $10,000 and/or a prison sentence of one to five years.
As he was leaving to attend lunch with Gov. Bobby Jindal, Nevers, D-Bogalusa, said he expected the new legislation to be heard by the Senate Commerce Committee. Nevers made his announcement at a rally organized by Together Louisiana, a statewide coalition of church groups and civic organizations dedicated to addressing socioeconomic inequalities.
The concept behind payday loans is simple: Customers borrow a small amount of money and are asked to repay it in a short period of time — typically two weeks. To get a loan, customers write a check for the amount of the loan, plus fees. Lenders hold on to the check until the borrower’s next payday. Borrowers are typically charged between $20 and $55 for each transaction and are subject to rates that reach as high as 700 percent when calculated annually.
How that is calculated the subject of much debate as individual loans carry far less in interest and fees but are supposed to be of short duration.
The industry argues that its short-term loan product is popular and is often the only venue for people to bridge a short-term cash flow problem. The lobbyists also say that the changes being sought by some legislators could put them out of business and leave customers no alternative but to do business with unregulated and less scrupulous lenders.