Legislation to create new type of loan for low-income borrowers draws critics

State Sen. Rick Ward, R-Port Allen, has proposed creating the “credit access loan,” a new type of financial product for Louisiana, intended for borrowers who can’t qualify for a bank loan. 

Ward says the loan could be a lifeline for borrowers dealing with an immediate financial emergency who don’t want to take out a payday loan, though critics say the high interest and fees allowed would let lenders take advantage of people with few options. 

“We do not need a whole new category of loans that are going to raise fees on Louisiana citizens,” says Troy McCullen, the former president of the Louisiana Cash Advance Association. 

As he has presented his bill, Ward has said the loans of up to $1,500 could benefit someone who, for example, blows out their tires and needs money quickly to replace them so they don’t lose their job. No matter how long it takes to repay the loan, the borrower would never have to pay back more than double what was originally borrowed, Ward says. 

But critics question Ward’s interpretation of the bill’s language, saying the cost could exceed 100% of the principal, and the necessity of the monthly “maintenance fees” of up to 13% that the legislation would allow along with up to 36% interest and a $50 origination fee. 

“One hundred percent interest is still pretty bad,” said Jessica Sharon, AVP of financial outreach with Pelican State Credit Union, during a committee hearing.

Senate Bill 381 has passed the Senate and the House Commerce Committee. 

“They are fast-tracking this thing,” McCullen says. 

Daily Report emailed Ward today to offer him the opportunity to comment but did not hear back in time for this report.