Louisiana Senate rejects limits to lending businesses

Posted May 4, 2014 by Simon Crompton
On Tuesday, the state senate of Louisiana rejected a bill that proposed limiting the number of payday loans that could be granted per year.
The California Department of Corporations issued a warning to consumers on August 15  2012 about the...
The California Department of Corporations issued a warning to consumers on August 15, 2012 about the dangers of using payday lenders via the Internet. "Unlicensed are becoming more aggressive in their collection (of debt) techniques," said CA Dept. of Corporations Commissioner Jan Lynn Owen, in a statement released to the press, that Wednesday.
Failure to pass the bill does not mean the fight is over. Debates will continue into next year over the right to limit people to easy availability to short-term funds when needed.
In an attempt to push for limits on lenders, who charge exorbitant fees and rates for payday loans, a coalition consisting of several constituents, including the Louisiana Association of Bishops, two consumer advocacy groups, and the American Association of Retired Persons, supports a movement to restrict these fees and limit the number of loans a person can take in one calendar year.
“There is no one in this room who can possibly say there isn't predatory lending taking place in our state,” said Sen. Ben Nevers, D-Bogalusa, defending his bill to cap loans at 10 per year. “I have been unable to satisfy either side, and certainly this is an attempt once again, to at least begin regulation of an industry that is out of control.”
The final vote of 20-17 favored the restrictive bill, but in order to pass, 26 votes, or two-thirds support, were needed. This is because the bill contained a new fee on loans to fund a state-run payday loan database.
Nevers had originally proposed legislation that would have placed limits only on the annual percentage rate charged by lending businesses to 36 percent; however, an exemption to state limits on interest was passed in the 1990s to allow for expansion of payday lending outlets statewide.
Unable to cap interest rates, the 10-loan limit was a compromise by bill supporters who were pleased to see majority support in the Senate. It will put pressure on some of these companies to act more like legitimate lending companies such as Hard Money.
Such a solution may have helped reduce the debt trap seen by so many who have felt the hardships of economic downturn.
Opposition to the limits claim taking away these short-term monetary benefits can put several of the state’s citizens in precarious situations. Those who are just days away from a paycheck, but need to make a mortgage payment rely on these services.
“I just don’t agree we should tie the hands of business, tie the hands of individual consumers. I just don’t think that’s government’s place,” State Sen. A.G. Crowe, R-Slidell said.
“We are disappointed, but we are also thankful that the majority of our senators went on record favoring the 36 percent cap,” said David Gray of the Louisiana Budget Project, which advocates for middle- and low-income consumers. “We are satisfied this issue isn't going away.”