BATON ROUGE, La. (AP) - Now that lawmakers have shot down efforts to cap annual interest rates for payday loans, supporters for stricter regulations of the storefront lenders are rallying behind another strategy.
They’re backing a bill by Sen. Ben Nevers, D-Bogalusa, that would limit borrowers to 10 payday loans per year. It awaits a hearing in the Senate Finance Committee.
Nevers said he is hopeful his loan cap bill could garner support because lawmakers are looking for a compromise on the issue of payday lending.
The approach of limiting the number of loans a person can take out each year wasn’t the first choice of organizations that sought tougher restrictions. They wanted limits on the fees that could be charged for the short-term, high-interest-rate loans.
And while supporters say they will stand by Nevers’ bill, they believe it is a second-rate solution. David Gray, of the left-leaning Louisiana Budget Project, described the bill as a field goal rather than a touchdown.
Andrew Muhl, director of advocacy for AARP Louisiana, said his organization will continue pushing for an interest-rate cap. “We’re not going to give up,” Muhl said.
But the idea has been rejected in House and Senate committees and by the full House. Lawmakers sided with the businesses’ concern that capping the fees they could charge would effectively shut them down.
In the House, legislators have overwhelmingly supported an industry-backed bill by Rep. Erich Ponti, R-Baton Rouge, that would give borrowers an installment payment plan option with no late fees - but that steers clear of adding new restrictions on fees.
Ponti said he will oppose Nevers’ bill. He said a cap on the number of loans does not help borrowers avoid late charges, which he said contributes to the debt cycle.
“My bill is the only one that does that,” he said.
Proponents for an APR cap say Ponti’s measure does not address the real problem with payday loans, the high interest rates that cause people to get trapped in debt and continually drawing down new loans to stay afloat.
But their favored approach hasn’t drawn enough support.
Nevers’ bill originally called for a cap of 36 percent on the annual interest payday lenders could charge. But the Senate judiciary committee rewrote the proposal to a cap of 10 loans a year.
Rep. Ted James, D-Baton Rouge, called for the same APR cap on the House side, but that failed in the House Commerce Committee. In a 52-43 vote, the full House also rejected James’ attempt at compromise, an annual interest rate cap of 72 percent.
Supporters of the tougher limits on the industry now are pinning their hopes on Nevers’ proposal to at least get something through the Legislature this session.
But first they want to see the cap lowered.
Broderick Bagert, of Together Louisiana, said the organization will work on amending Nevers’ bill to lower the cap to five loans per year.
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Online:
Senate Bill 84 can be found at www.legis.la.gov
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