An effort to put a limit on the cost of “payday” loans appears to be dead after the Louisiana House advanced an industry-friendly bill Tuesday.
State Rep. Ted James, D-Baton Rouge, hoped to hijack House Bill 766 and cap the annual cost of the short-term loans at 36 percent interest after his own legislation died in committee.
James said his votes on the House floor slipped away as payday lenders and their lobbyists beat the drum that the change would drive the industry out of business.
HB766 advanced to the state Senate on a 91-5 House vote. It is a measure that would make all lenders play by existing rules. Online lenders would have to follow the same regulations as businesses with brick-and-mortar locations in Louisiana. Borrowers also would be offered an installment plan if they cannot repay their loans.
“This is a great step forward,” said the bill’s sponsor, state Rep. Erich Ponti, R-Baton Rouge.
Andrew Muhl, director of advocacy for AARP Louisiana, lamented the failure of a cap on the loans’ annual interest fee.
“We’re disappointed that the Legislature didn’t hear the voices of their constituents,” he said.
Troy McCullen, president and CEO of Finance America Business Group, praised Ponti’s bill, but said the discussion can continue. Finance America Business Group owns 31 Cash-2-U lenders throughout the state.
“Many feel there’s more that should be done. Some members asked me today to work with them and find a solution to resolve the interest rate issue and the number of loans a customer can have at one time. I understand their concerns and want to continue the dialogue. We still have a long way to go,” McCullen said.
Payday loans became a hot topic this legislative session as AARP Louisiana, Together Louisiana and the state’s Catholic bishops clamored for changes.
They raised concerns that the loans — which offer borrowers a small amount of money to be repaid next payday — prey on the poor and elderly, trapping them in a debt cycle with an annual percentage rate that can exceed 400 percent.
The lenders countered that capping their fees at 36 percent interest per year would end payday loans in Louisiana. They said the cap would whittle their profit margins.
So far, the only payday loan bill with legs appears to be Ponti’s legislation, which ignores complaints about the APR.
Critics consider the legislation to be an industry bill while lenders insist the proposal would help borrowers.
Ponti, R-Baton Rouge, kept busy Tuesday scurrying between his desk and the amendment room in the House chamber. James also made a few forays into the amendment room. Lobbyists buttonholed both legislators in the corridor.
When Ponti brought the bill to the floor for debate, he offered a change that he said would address concerns about a hospitalization affecting borrowers’ ability to call lenders about their loan payments.
His amendment — which the House adopted — would give borrowers three days from hospital discharge to request a payment plan.
James took the microphone next, offering a cap of 72 percent interest on the annual cost of the loans. “That’s a lot more than I’m comfortable with,” James said, adding that he wanted to be fair.
The House rejected the amendment with 43 voting for it and 52 voting against it.
James also tried to tack on an amendment outlining to borrowers that the APR varies and can reach as high as 1300 percent. That amendment died as well.