A bill that would expand Louisiana’s payday loan industry is catching heat from different groups as it awaits House approval.
Senate Bill 365 by State Sen. Rick Ward, R-Port Allen, would create the Louisiana Credit Access Loan Act, allowing lenders to issue new payday loans ranging from $500 to $875 for terms of three to 12 months. Payday loans are currently capped at $350 for up to 60-day terms.
National payday lending companies are pushing the bill as a safeguard for their business model in case the Consumer Financial Protection Bureau imposes new regulations in 2019. Still, opponents argue the industry preys on vulnerable low-income borrowers, trapping them in an endless cycle of debt.
When the bill passed through the Senate last week, 20-17, there was no clear partisan split on votes. That’s because it’s a battle between local and national companies, says Troy McCullen, president of the Louisiana Cash Advance Association, who adds that all local payday loan associations oppose the legislation.
McCullen calls the bill a “vehicle to expand another loan product at a higher rate,” saying it’s a “ploy by national companies to enrich themselves.”
The legislation doubles the annual percentage rate on loans that can already be made in the state, McCullen says.
“Who benefits from a double? The national companies,” he says. “Follow the money.”
Ward could not be reached for comment this morning. However, proponents of such bills typically argue that payday lenders provide a much needed service to lower-income borrowers who have difficulties obtaining traditional bank loans.
Under the existing Louisiana Consumer Credit Law, McCullen says, consumers can take out a six-month loan for $500 with a $131 attached fee and an 85% APR. However, Ward’s bill would create new “installment” loans, he says, which would raise the fees to $270 and the APR to 167%.
Jan Moller, director of the Louisiana Budget Project, says the industry already drains $240 million from each year from Louisiana workers who often cannot afford the high-interest loans.
“Nobody can afford triple-digit interest rates,” Moller says. “This is a group of well-connected lobbyists pushing through a bill on behalf of their clients by selling a false narrative.”
About 15 lobbyists are working on the bill, McCullen notes.
“From my vantage point, it’s greed and arrogance at the highest level,” he says.