From time to time, Louisiana lawmakers have come to the aid of those who make so-called payday loans. Sen. Rick Ward, R-Port Allen, is this year’s champion with Senate Bill 381.
Legislation that was narrowly passed by both houses would cap finance charges at 100% of the original loan amount. That means lenders could charge up to $1,500 in fees on a $1,500 loan, for a total repayment of $3,000, according to The Advocate.
The senator said his “Louisiana Access to Credit Loans Act” would help state residents living on a paycheck make ends meet when faced with surprisingly large expenses.
Under current law, lenders can offer a loan of up to $350, due on the borrower’s next payday. The maximum the lender can make per loan is $55. Ward’s bill does not change that.
Ward sponsored another payday loan bill in 2018. It stated that the loan term could not be less than three months and could not exceed 12 months. The amount of the loan could not be less than $500 and could not exceed $875. The bill passed the Senate 20-17 but died in the House Commerce Committee.
I wrote in a June 3, 1999 column about a Bossier City woman who got one of these loans. She needed $200 for an emergency out-of-town trip and took out a two-week loan. The maximum they lent at that time was $201 and it had to be paid back in 14 days.
When a customer borrowed that $201, they had to leave a check for $246 to cover the principal and $15 in interest. The other $30 was for documentation and set-up costs. That’s an annual interest rate of over 580 percent.
“It was a little high,” the borrower said, “but when you need it, you need it.”
The Associated Press reported that there were about 30 payday loan companies in the state in 1992. That number grew to 455 in 1998 and 489 by the end of 1999.
Foster Campbell, a current member of the Louisiana Civil Service Commission, was a state senator in 1999. He said, “We’ve had 500 of these companies open since 1992 and none of them have failed. . I have never heard of such statistics. But the reason why they didn’t is because they deceive people by charging outrageous interest rates.
OK, back to Ward’s bill which passed the House 54-35, one vote more than the 53 needed. The Senate vote was 20 to 14, the exact majority he needed.
Republican senses Mark Abraham of Lake Charles and Mike Reese of Leesville voted for Ward’s bill. Sen. Jeremy Stine, R-Lake Charles, voted against. Sen. Heather Cloud, R-Turkey Creek, was recorded as absent.
GOP Representatives Ryan Bourriaque of Grand Lake, Dewith Carrier of Oakdale, Troy Romero of Jennings and Phillip Tarver of Lake Charles voted for the bill. Representatives Wilford Carter, D-Lake Charles; Charles Owen, R-Rosepine, and Rodney Schamerhorn, R-Hornbeck, voted against. Representative Brett Geymann, R-Moss Bluff, was recorded as an absentee.
The bill now awaits action by Governor John Bel Edwards. Lenders would make most of their money through monthly maintenance fees of up to 13% of the original loan amount.
Alex Horowitz, consumer credit researcher at The Pew Charitable Trusts, told The Advocate he had never seen such high fees. He said the bill would expose Louisiana consumers to financial harm, rather than creating an affordable loan market. Horowitz said seven of the nation’s 12 largest banks have launched or announced programs to provide small dollar loans to customers.
Kenneth Pickering twice served as Louisiana’s chief banking regulator. He said he had no idea what the maintenance fee even covers. “Once a loan is on the books, there’s nothing left to maintain,” he said. Pickering calls it more interest.
Stanley Dameron, Commissioner of the Office of Financial Institutions, said: “Some of the people applying for these loans might not qualify from your bank, but they certainly would from a credit union or finance company. “
Pelican State Credit Union’s Jessica Sharon told lawmakers that credit unions were explicitly created to help people of modest means.
Even an official from a state association that represents payday lenders said Ward’s new product was unnecessary. He said the loans are already available in Louisiana at a fraction of the cost. “It’s greed and arrogance at the highest level,” he said.
Ward’s bill is certainly a strong candidate for a gubernatorial veto.