From time to time, Louisiana lawmakers have come to the aid of those who provide what are known as payday loans. Sen. Rick Ward, R-Port Allen, is this year’s champion with Senate Bill 381.
Legislation narrowly passed by both chambers would cap finance charges at 100 percent of the original loan amount. That means lenders could charge up to $1,500 in fees for a $1,500 loan, or a total payment of $3,000, according to The Advocate.
The senator said his “Louisiana Credit Access Loan Act” would help state residents living paycheck to paycheck make ends meet when faced with unexpectedly large expenses.
Under current law, lenders can offer a loan of up to $350, which is due on the borrower’s next payday. The most the lender can do per loan is $55. Ward’s bill doesn’t change that.
Ward sponsored another payday loan bill in 2018. He said the loan term could not be less than three months or exceed 12 months. The loan amount may not be less than $500 or 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 those loans. She needed $200 for an emergency trip out of town and offered a two-week loan. The maximum they lent at that time was $201 and had to be repaid in 14 days.
When a customer borrowed that $201, he had to write a check for $246 to cover the principal and $15 interest. The other $30 was for documentation and origination fees. That’s an annual interest rate of more than 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 rose to 455 in 1998 and 489 at the end of 1999.
Foster Campbell, a current member of the Louisiana Public Utilities Commission, was a state senator in 1999. He said, “We’ve opened 500 of these businesses since 1992 and none of them have gone out of business. I’ve never heard of that kind of stat. But the reason they haven’t is they’re taking advantage of people by charging them outrageous interest rates.”
Well, back to Ward’s bill that has passed the House 54-35, one more vote than the 53 required. The Senate vote was 20 to 14, the exact majority he needed.
Republican Senators Mark Abraham of Lake Charles and Mike Reese of Leesville voted in favor of Ward’s bill. Sen. Jeremy Stine, R-Lake Charles, voted against it. Sen. Heather Cloud, R-Turkey Creek, was recorded as absent.
Republican Representatives Ryan Bourriaque of Grand Lake, Dewith Carrier of Oakdale, Troy Romero of Jennings and Phillip Tarver of Lake Charles voted in favor of 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 absent.
The bill is now awaiting action from Governor John Bel Edwards. Lenders would get most of their money with a monthly maintenance fee of up to 13 percent of the original loan amount.
Alex Horowitz, a consumer finance researcher at The Pew Charitable Trusts, told The Advocate that he had never seen a fee this high. He said the bill would expose Louisiana consumers to financial harm, instead of creating an affordable lending market. Horowitz said seven of the nation’s 12 largest banks have launched or announced programs to make small-dollar loans to customers.
Kenneth Pickering twice served as Louisiana’s chief banking regulator. He said that he has no idea what the maintenance fee covers. “Once a loan is put on the books, there’s nothing to keep,” he said. Pickering calls it more interest.
Stanley Dameron, commissioner of the Office of Financial Institutions, said: “Some of the people who would apply for these loans might not qualify at their bank, but they certainly would at a credit union or finance company.”
Jessica Sharon of Pelican State Credit Union told lawmakers that credit unions were created explicitly to help the poor.
Even an official from a state association representing payday lenders said there is no need for Ward’s new product. He said loans are now available in Louisiana at a fraction of the cost. “This is greed and arrogance at the highest level,” he said.
Ward’s bill is definitely a good candidate for the governor’s veto.