Last Modified: Sunday, March 23, 2014 7:10 AM
By Jim Beam / American Press
Payday loans will be a hot topic for the coming week at
the Louisiana Legislature. The industry has offices all over the place,
sometimes three at the same location. Obviously, there is a demand for
their services, but at what cost?
are short-term, highinterest loans that are based on the borrower’s
next paycheck. A person can get a quick $100 loan to help pay his bills
by writing a postdated check, including the interest, that the loan
office agrees not to cash until payday. The interest on that $100
varies, but it has been reported that a typical loan of that amount
costs $30 in interest, which is more than 780 percent annually.
spokesmen deny the rates are that high. Troy McCullen, the owner of 31
pay day loan locations in Louisiana, said state law prohibits much of
what the companies are alleged to be doing.
bills that will be heard at the Legislature should help clear the air,
but their sponsors insist the industry definitely needs tougher
regulations. Most of the citizens who take out pay day loans are already
in desperate financial situations and don’t need to get deeper in debt.
number of organizations are pushing for tighter controls. They include
AARP Louisiana, the Louisiana Budget Project, Habitat for Humanity,
Catholic bishops, ministers and community organizers and United Way of
Southeast Louisiana. They make up the Louisiana Coalition for
Baton Rouge, another member, said Louisiana families paid over $196
million in fees and interest on pay day loans in 2011 and 57,000
households take out loans each year.
Bill 84 by Sen. Ben Nevers, D-Bogalusa, is scheduled for a Tuesday
hearing before the Senate Commerce Committee. A similar measure (House
Bill 239) has been filed by Rep. Ted James, D-Baton Rouge. They want to
cap the annual interest rate at 36 percent.
The Louisiana House Democratic Caucus
said the state has one of the highest concentrations of pay day loan
storefronts in the nation, with more than four of them for every
McDonald’s. Jan Moller, executive director of the Budget Project, told
The Advocate there are some 1,000 storefront pay day lenders operating
said, “State law allows pay day lenders to get away with charging
customers interest rates of more than 300 percent, compared to 24
percent for credit cards. These outrageous interest rates trap many
hard-working people into long-term debt.”
those who borrow don’t repay the loans, they really get into deep debt.
The Budget Project said on average, borrowers recycle loans nine times,
which translates to paying $270 in fees on a $100 loan. They pay fees
to renew their loans and then renew them again and again, or take out
more pay day loans.
The proposed legislation would prohibit lenders from rolling over the loans and improve the way loans are handled.
last serious effort the Legislature made to tighten controls on pay day
loans came in 1999. Foster Campbell, a current member of the Louisiana
Public Service Commission and former state senator, wanted to limit the
annual interest rate to 72 percent. He said the prime interest rate at
the time was 7.75 percent.
“If you can’t make it on nine times the prime, I feel sorry for you,” Campbell said at the time.
Rep. John Travis, D-Jackson, had a House bill in 1999 that set the
annual loan rate at 180 percent, which was 16.75 percent for the two- to
fourweek life of the loans. He said it was deceiving to compare
interest rates because
the loans are short-term transactions. His bill passed unanimously and
he was opposed to the 6 percent rate that was approved by the Senate.
who votes to kill this bill (with the 16.75 percent) wants things to
continue as they are,” Travis told House members. He won out in the end.
Associated Press in 2000 said before the change pushed by Travis it was
routine for borrowers to pay $45 in fees to get $201 for 14 days, which
translates to an annual percentage rate of 583.7 percent. Under the
Travis bill, a lender could charge up to $40.44 on the same loans, or an
annual rate of 523.1 percent, not much of a change.
are another problem. There was an effort to curb them in 1999, but
legislators took action in 2010 that allowed increased fees.
who take out pay day loans don’t want the government to get more
involved. And the industry said tougher regulations will drive their
customers to loan sharks. However, some critics of the loans believe the
pay day companies are loan sharks themselves.
Weekly reported last week the pay day loan bills are the most “lobbied
up” measures at the legislative session so far. It said at least 40
lobbyists representing the companies met for a strategy session. So, you
know we are talking big bucks here.
legislators in office in 1999 supported the bills by Campbell and
Travis, because they made some improvements in the pay day loan
business. However, Travis wouldn’t agree to any major changes. We will
soon find out how serious legislators are this time around about
reforming a loan system that takes unfair advantage of people who are
already down on their luck.
Beam, the retired editor of the American Press, has covered people and
politics for more than five decades. contact him at 494-4025 or firstname.lastname@example.org.