Payday loans survive to thrive

By By Jim Beam / American Press

BATON ROUGE — Louisiana citizens who are down on their luck and caught up in the payday loan trap won’t be getting much help

from the Legislature.

In the immortal words of Rep. Hunter Greene, If you borrow money, you pay it back. It’s not something that is complex.

The Baton Rouge Republican obviously hasn’t had any trouble paying for groceries, medicines, utilities, rent, car and education

expenses, insurance, clothes and other living costs. 

People who use payday loan companies are usually down to their last straw and need some quick cash to tide them over until

their next payday. The process is so simple, they think they can handle the debt.

The Advocate last month quoted from a 2010 survey done by the American Payroll Association that found 71.6 percent of American

employees are living paycheck to paycheck. Short-term loans then become an option to make it from one payday to the next.

Current law allows small loan companies to charge a fee not to exceed 16.75 percent of the face value of the post-dated check

the borrower leaves with the company, usually for two weeks. However, the fee cannot exceed $45.

Finding a payday loan company is easy. There are some 1,730 of them in the state. In some cities there are three in the same

building.

One woman interviewed for the story in The Advocate talked about a $300 loan she got from a payday lender two years ago after

losing her job. When it came time to pay the money back, she didn’t have it. So she took out one loan after another.

The woman told the newspaper it cost her $2,500 to climb out of her debt trap. She had an answer for people like Greene, who

said she should have just paid back the original $300 loan.

“If I have a bill, I pay the bill,” she

said. “The problem was that I just couldn’t get caught up. Sometimes

you find yourself

in a desperate spot and you do desperate things. I made those

choices, and they were bad decisions. But if you have a family,

you do what you have to do to keep things rolling.”

OK, so what’s the problem? It’s the exorbitant interest rates charged by the payday loan companies, particularly on those

additional loans people end up making.

Two of the payday loan bills offered this session wanted to set a maximum 36 annual percentage rate. 

One payday loan company office manager said that APR would mean a $100 loan would cost about $1.38, plus a $5 document fee.

She said the company would make less than $7 on the loan, not enough to keep it in business.

She is probably right about that, but

the companies don’t want any change in the interest rate. Legislators

rejected an amendment

this week to a payday loan bill that would have allowed them a 72

APR. 

The companies did their homework, hiring over 40 lobbyists to protect their interests. Rep. Ted James, D-Baton Rouge, who

sponsored a 36 percent bill that was rejected in committee, talked about that hurdle.

“When you have 45 lobbyists working on something, it’s hard,” he said.

Members of the House Commerce Committee

heard hours of testimony from people caught in the payday loan quagmire

when they

debated the James bill. Witnesses talked about financial

emergencies, relatives they have rescued from the loan trap and

struggles

to get back on their feet.

James said, “This is a long, vicious cycle of debt that too many people in our community find themselves trapped in.”

You knew the lobbyists must have felt they had the battle won before the hearing began. They took only minutes to state their

case, and the hearing was over.

Another bill, written by Sen. Ben Nevers, D-Bogalusa, set a 10 payday loan limit, but it got sent to a second committee where

it may run into trouble. His amended measure also proposed to set up a database so the state could get a better handle on

how much money people are borrowing from payday lenders.

One measure did manage to make it out of the House, but neither side is crazy about it. It is now in the Senate.

House Bill 766 by Rep. Erich Ponti, R-Baton Rouge, offers borrowers an opportunity to pay a loan back in installments. It

also limits interest when borrowers get behind on payments.

Organizations supporting lower loan rates aren’t happy about the compromise, but they haven’t found many sympathizers in the

Legislature.

“… Should have known Louisiana legislators would side with financiers over regular people. Typical,” commented a reader of

the Advocate.

Together Louisiana, one of the

organizations backing lower interest rates, quoted statistics it said

came from the state Office

of Financial Institutions. Over 3.1 million payday loans

originated in Louisiana in 2013 and residents paid over $145.6 million

in payday loan fees and interest.

Legislators, loan officials and borrowers might want to keep Psalm 112:5-6 from the Bible in mind as they continue to deal

with payday loans. It says:

“It is well with the man who deals generously and lends; who conducts his affairs with justice. For the righteous will never

be moved; he will be remembered forever.”

Jim Beam, the retired editor of the American Press, has covered people and politics for more than five decades. Contact him at 494-4025 or jbeam@americanpress.com.