Senate rejects payday loan bill

An effort to put limits on “payday” loans in Louisiana died Tuesday in the state Senate after some twists and turns.

Senate Bill 84 fell six votes short on a 20-17 vote. The bill needed 26 votes after Senate President John Alario, R-Westwego, dealt supporters a blow by declaring it required two-thirds’ approval.

“Citizens lose. Lobbyists win. The voice of the people was silenced by campaign contributions,” the Rev. Lee Wesley, of Baton Rouge, said afterward.

Critics of SB84 contended it would gut the payday loan industry in Louisiana by limiting borrowers to 10 short-term transactions a year.

“We remain hopeful that we can find common ground ... We understand the importance of finding the right balance between consumer access to credit and protections,” said Jamie Fulmer, senior vice president of public affairs for Advance America, Cash Advance Centers, Inc.

The fees associated with payday loans — which offer short-term borrowing, typically until payday — have emerged as a controversial issue this session. Organizations such as Together Louisiana and AARP Louisiana want to make the loans cheaper.

They argue that borrowers get trapped in a cycle of debt because the loans are too enticing and then too costly.

The lenders themselves hired lobbyists to battle against efforts to limit the number of loans per borrower, cap the annual interest rate and to set up a database to track people borrowing from multiple lenders.

The lenders warned legislators not to kill an industry that thrives in Louisiana.

SB84 initially would have limited the amount of interest that can be charged annually on the loans.

It turned into limiting consumers from taking out more than 10 payday loans in a year.

Along the way, it picked up a transaction fee to establish a database on payday loans. The idea was for the state to keep an eye on borrowers’ financial activity, ensuring they weren’t jumping from one payday lender to the next.

State Sen. Jody Amedee, R-Gonzales, asked Alario on Tuesday if the transaction fee triggered the two-thirds’ approval requirement associated with fee bills. “I’ll ponder that,” Alario said. Later, he said the bill would need two-thirds’ approval — or an often hard-to-gather 26 votes.

State Sen. A.G. Crowe, R-Slidell, questioned what would happen if someone is 30 days away from receiving a settlement check and needed a loan to pay the house note but had already hit the 10-loan limit.

He said that person would lose his house.

“I just don’t agree we should tie the hands of business, tie the hands of individual consumers. I just don’t think that’s government’s place,” Crowe said.

The bill’s sponsor, state Sen. Ben Nevers, said Florida limits borrowers to one payday loan per year. He said the annual limit in Oklahoma is two loans. “We’re talking about 10. We’re trying to be abundantly fair with industry,” he said.

Later, Nevers, D-Bogalusa, joked that SB84 was a lobbyist employment bill, noting the number of lobbyists working on payday lenders’ behalf. He said he was glad to help the state’s economy.

Solutions were offered to remove the hurdle of needing two-thirds approval. State Sen. Robert Adley, R-Benton, suggested allowing lenders to independently verify consumers’ borrowing activity. The Senate rejected his proposal.

“This would be a tax on small business, even if it’s minimal,” Amedee protested.

Finally, Nevers proposed gutting his bill and putting on a 36 percent cap on the annual interest cost of the loans.

Amedee said that would diminish the profit on a $300 loan to $4.50.

“This is a coffin bill right here. It ends it,” Amedee said, predicting the death of the payday loan industry.

Once that amendment failed, Nevers asked the Senate just to let the legislation live and allow him to find a compromise. His plea fell on deaf ears.

Afterward, Andrew Muhl, advocacy director for AARP Louisiana, vowed to keep working on the issue. He said seniors on fixed incomes need reform.

“We were disappointed to see the Legislature’s reluctance to listen to the majority of Louisianans,” Muhl said.