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Payday Loans Bills Struggle in Two States

[May 19, 2009.]

 

Although the Payday Loans Reform Act of 2009 (H.R. 1214) is still alive and well in the US Congress, similar bills in at least two state legislatures may be about to run out of steam.

Frustrated of South Carolina

In South Carolina, The State reported last Thursday that anti-payday loans legislators are running out of time in their attempts to regulate the industry further.

The bill that seems to be losing ground seeks to:
• Cap the maximum value of payday loans at $500--even though the industry already has a voluntary $300 limit;
• Enforce a 48-hour cooling off period between one payday loan ending, and another beginning;
• Establish a statewide database that would prevent any lender from having more than one payday loan at any one time.

After last Tuesday's session ended without agreement, the newspaper quoted one legislator, Sen. Larry Martin, R-Pickens, as saying: "I’m very frustrated."

Texas Steers Away from Regulation?

Also last week, a local television station in Texas, WFAA-TV, said that the state legislature has at least five payday loans bills pending, but questions whether any of them has a serious chance of being enacted.

Washington State Introduces Sensible Regulations

Meanwhile, in Washington State, Governor Chris Gregoire signed a payday loans bill into law last Friday. According to the Seattle Times, the legislation will cap the maximum value of payday loans at $700 or 30 percent of the borrower's monthly income, whichever is the lower. Furthermore, it will prohibit a borrower from having more than one payday loan at a time, and will introduce a statewide database to enable enforcement.

The new law also provides help for those borrowers who get into difficulty. Critically, however, it does not place any cap on interest rates.

Good Moaning America

Yesterday, ABC News's Good Morning America show took up the case of Laura, a senior citizen in South Carolina, who got herself into trouble with ill-advised payday loans. The 66-year old woman's only income is a monthly $575 social security check.

Some time back, Laura's car broke down, and she borrowed $300 from a payday lender to have it repaired. At the time, she agreed to repay $345 out of her next social security check. When the time came, she couldn't make the payment, and instead renewed the loan.

More than two years on, she still has not repaid the $300, but has had to find more than $1,000 in fees. This is, undeniably, a very sad story, and Laura--a person who is likely to be vulnerable--must have suffered a great deal of stress.

However, one question does need to be answered. How does someone reach the age of 64, and still believe that it is possible to repay $345 out of a total income of $575?

 

About Author:

Peter Andrew has been writing about -- and for -- business for more than two decades. For the last couple of years, he has found himself increasingly specializing in the U.S. financial sector.

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