Payday loans survive to thrive

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.