Every now and then, Louisiana legislators have come to the aid of those who make what are called payday loans. Sen. Rick Ward, R-Port Allen, is this year’s champion with Senate Bill 381.
The legislation that has narrowly passed both houses would cap finance charges at 100 percent of the original loan amount. That means lenders could charge up to $1,500 in fees on a $1,500 loan, or a total $3,000 repayment, according to The Advocate.
The senator said his “Louisiana Credit Access Loan Act” would help state residents living paycheck to paycheck make ends meet when faced with unexpectedly large expenses.
Under current law lenders can offer a loan of up to $350, which is due on the borrower’s next payday. The most the lender can make per loan is $55. Ward’s bill doesn’t change that.
Ward sponsored another payday loan bill in 2018. It said the term of the loan couldn’t be less than three months and couldn’t exceed 12 months. The amount of the loan couldn’t be less than $500 and couldn’t exceed $875. The bill passed the Senate 20-17 but died in the House Commerce Committee.
I wrote in a June 3, 1999, column about a Bossier City woman who got one of those loans. She needed $200 for an emergency trip out of town and floated a two-week loan. The maximum they loaned at that time was $201 and it had to be paid back in 14 days.
When a customer borrowed that $201, they had to leave a check for $246 to cover the principal and $15 in interest. The other $30 was for documentation and origination fees. That is an annual interest rate of more than 580 percent.
“It was a little high,” the borrower said, “but when you need it, you need it.”
The Associated Press reported there were about 30 payday loan companies in the state in 1992. That number grew to 455 by 1998 and 489 at the end of 1999.
Foster Campbell, a current member of the Louisiana Public Service Commission, was a state senator in 1999. He said, “We’ve had 500 of these businesses open since 1992 and not one of them has failed. I’ve never heard of that kind of statistic. But the reason they haven’t is they’re abusing people by charging outrageous interest rates.”
OK, let’s get back to Ward’s bill that has passed the House 54-35, one vote more than the 53 needed. The Senate vote was 20-14, the exact majority it needed.
Republican Sens. Mark Abraham of Lake Charles and Mike Reese of Leesville voted for Ward’s bill. Sen. Jeremy Stine, R-Lake Charles, voted against. Sen. Heather Cloud, R-Turkey Creek, was recorded as absent.
GOP Reps. Ryan Bourriaque of Grand Lake, Dewith Carrier of Oakdale, Troy Romero of Jennings, and Phillip Tarver of Lake Charles voted for the bill. Reps. Wilford Carter, D-Lake Charles; Charles Owen, R-Rosepine, and Rodney Schamerhorn, R-Hornbeck, voted against. Rep. Brett Geymann, R-Moss Bluff, was recorded as absent.
The bill is now awaiting action by Gov. John Bel Edwards. Lenders would make most of their money off of a monthly maintenance fee worth up to 13 percent of the original loan amount.
Alex Horowitz, a consumer finance researcher at The Pew Charitable Trusts, told The Advocate he has never seen a fee that high. He said the bill would expose Louisiana consumers to financial harms, rather than create an affordable loan market. Horowitz said seven of the 12 largest banks in the country have launched or announced programs to provide small-dollar loans to customers.
Kenneth Pickering served twice as Louisiana’s top banking regulator. He said he has no clue about what the maintenance fee even covers. “Once a loan is put on the books, there’s nothing to maintain,” he said. Pickering calls it more interest.
Stanley Dameron, commissioner of the Office of Financial Institutions, said, “Some of the individuals that would apply for these loans might not qualify at your bank, but they certainly would at a credit union or finance company.”
Jessica Sharon of Pelican State Credit Union told legislators credit unions were explicitly created to help people of modest means.
Even an official with a state association that represents payday lenders said there is no need for Ward’s new product. He said the loans are already available in Louisiana at a fraction of the cost. “This is greed and arrogance at the highest level,” he said.
Ward’s bill is definitely a good candidate for a gubernatorial veto.