Efforts to establish new payday lending option failed in a House committee last Wednesday as legislators disagreed on the best way to serve consumers while protecting them from crippling debt and predatory lending.

 

Back in March, LCUL was notified of Senate Bill 365, which sought to establish a new payday loan product offering loans between $500 and $875 with three to 12-month terms. The state's current payday loan system allows lenders to offer a maximum of $350 for up to 30 days.  

In addition to creating a new loan option, SB365 would create a state database tracking consumers' short-term loans, allow consumers to take out only one short-term loan at a time, cap loan payments at 20 percent of gross monthly income and have a maximum annual percentage rate, or APR, of 167 percent.

 

Representative Edmond Jordan, D-Baton Rouge and board member of Essential CU, questioned the ambivalence of the proposal, noting that offering a high interest loan that's less predatory than the payday loans on the market doesn't make the proposal less detrimental to borrowers. "You can put a knife nine inches in my back and pull it out six and you can't call that progress. I've still got a knife in my back," Jordan said.

 

Ronaldo Hardy, CEO of Southeast Louisiana CU, along with Rick Williams, CEO of Essential CU, testified before the committee on behalf of the Louisiana credit union system, saying credit unions offer lower interest rates for comparable loan amounts and terms, with the added benefit of financial literacy services.

 

 

Prior to the May 9 testimonies, LCUL and Adams & Reese filed a note of opposition on behalf of Louisiana credit unions.