BATON ROUGE, La. (AP) — State lawmakers have spurned an effort to establish new payday loan options in Louisiana.
The House commerce committee voted 9-7 against the bill Wednesday, as lawmakers disagreed on the best way to serve consumers while protecting them from crippling debt and predatory lending.
Sen. Rick Ward, a Port Allen Republican, proposed to create a new product offering loans between $500 and $875 with three- to 12-month terms. The state's current payday loan system allows lenders to offer a maximum of $350 for up to 30 days. The measure also would allow consumers to take out only one short-term loan at a time, cap loan payments at 20 percent of gross monthly income and have a maximum annual percentage rate of 167 percent.
The Advocate reports supporters called it a "consumer-friendly" option to help people with desperate financial needs. Opponents worried about worsening people's financial situations.
The measure was an effort to preemptively counter new rules taking full effect in August 2019 from the Consumer Financial Protection Bureau, or CFPB, to rein in small-dollar, short-term loans. The increased restrictions would wipe out between 80 and 90 percent of all payday loans issued in Louisiana, said Larry Murray with Advance America, the country's largest provider of small-dollar loans and other cash-advance services.
Opponents argued the measure is premature as resolutions to overturn the new CFPB rules move through Congress.
Rep. Edmond Jordan, a Baton Rouge Democrat, said offering a high-interest loan that's less predatory than the payday loans on the market doesn't make the proposal less detrimental to borrowers.
"You can put a knife nine inches in my back and pull it out six, and you can't call that progress. I've still got a knife in my back," Jordan said.
Ward described the short-term, high-interest loans as a necessity. For individuals with poor credit, infrequent or insufficient income, and no friends or family to step in as a reasonable lending alternative, he said a sudden financial crisis could be ruinous without a payday loan available.
"We can live in the land where we think this just shouldn't exist. That's the perfect world, but it's not reality," Ward said.
Ward's bill had received Senate support in a 20-17 vote, the minimum vote needed. House committee action stalled it.
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Senate Bill 365: www.legis.la.gov
