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The year in business: Payday loan debate heats up in Baton Rouge …

Lobbyists for the payday loan industry stormed Baton Rouge over the summer as state lawmakers deliberated tighter controls on short-term, high-interest loans.

Proponents for stricter rules argued payday loans prey on the working class and trap them in a cycle of debt that can ruin their credit.

But payday lenders said restrictions would put them out of business and stymie a much-needed source of lending for the poor.

By the end of the 2014 legislative session, the payday loan industry had beaten back several proposals to limits its activity. But the fight isn’t over.

What happened: The Legislature considered several proposals putting limits on payday loans during the 2014 session.

Initial bills, sponsored by Rep. Ted James, D – Baton Rouge and Sen. Ben Nevers, D – Bogalusa, proposed capping payday loan interest rates at 36 percent annually.

A later draft abandoned the 36 percent cap and instead proposed limiting borrowers to 10 payday loans per year. It also required payday lenders to enter transaction into a database reviewed by the Office of Financial Institutions.

The bill failed on the Senate floor in late April, despite the support of consumer advocates, including AARP Louisiana and Louisiana Together, a statewide network of religious and civic organizations.

Senators who voted against the bill were wary of placing limits on lending, which they said could damage the industry and hurt consumers.

What’s next: AARP Louisiana, Louisiana Together and other groups that led the initial charge for limits have vowed to continue their push in the 2015 session.

Payday lenders are likely to face heightened scrutiny in coming years, even if Louisiana rules do not change.

Federal regulators have already cracked down on banks that offer short-term products.

In July, the Consumer Financial Protection Bureau reached a $10 million settlement with payday lender ACE Cash Express over illegal debt collection tactics. The agency, which became the first to oversee payday loans in 2012, is in the process of drafting rules for the entire industry.

In the meantime, traditional lenders, including Liberty Bank & Trust in New Orleans, are experimenting with ways to offer small loans and other products tailored for low-income borrowers.

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Payday Loan Issue Being Resurrected – LaPolitics

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After failing to pass reform legislation aimed at the payday loan industry last year, Sen. Ben Nevers, D-Bogalusa, said he is considering bringing a bill again but is still on the fence.

“I haven’t decided yet,” he said. “There’s an audit advisory meeting I want to attend in October that should give me a better idea. I’ve been told there are strides being made in monitoring the industry. I’m trying to listen to all sides right now and figure out what is best.”

Nevers doesn’t sound eager to repeat the huge lobbying battle that was waged during the spring session. Yet he is still interested in learning more about the issues of repeat lenders, meaning those consumers who repeatedly take out payday loans, and what reporting requirements look like.

Right now, local-level governments, like the Baton Rouge Metropolitan Council, are taking turns looking into the industry, but there’s no telling where that might all end up.

Meanwhile, the industry has formed a new trade group, the Louisiana Payday Loan Association. Lobbyist Danny Ford, a spokesman for the association, said members will be meeting soon to discuss a 2015 legislative agenda and to address potential regulations that may be handed down by the federal government.

“But it’s too early to tell what kind of strategy we might have for next year,” he said.

Ford pointed out that the industry supported HB 766 by Rep. Erich Ponti, R-Baton Rouge, during the most recent session to give the state the ability to regulate online lending; establish debt consolidation and extended payment plans; and to abolish delinquency fees.

This story first appeared in Issue 996 of LaPolitics Weekly on Sept. 18, 2014. Wish you would have read it then? Subscribe now!

Photo Credit: Seth Anderson

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Supporters Seek New Angle to Limit Payday Lending

Advocates of payday lending regulation are looking to another strategy now that Louisiana lawmakers have squashed efforts to cap the loans’ annual interest rates. A bill by Sen. Ben Nevers (D-Bogalusa) would limit borrowers to 10 payday loans per year. Nevers hopes his measure will gather support as lawmakers seek a compromise on payday lending. It originally called for a 36 percent ceiling on annual interest rates, but the Senate judiciary committee rewrote the legislation to instead restrict the number of loans borrowers could take out in a year to 10.

Rather than limiting the number of loans borrowed each year, organizations seeking tougher restrictions on the loans would prefer a fee limit. They see Nevers’ bill as a second-rate solution, although they intend to support it. Andrew Muhl, director of advocacy for AARP Louisiana, said his organization will keep promoting an interest rate cap.

An industry-backed bill by Rep. Erich Ponti (R-Baton Rouge) would give borrowers an installment payment-plan option that has no late fees, but it avoids adding new restrictions on fees. Ponti plans to oppose Nevers’ bill, saying that a cap on the number of loans does not help borrowers avoid the late charges that contribute to the debt cycle. Supporters of an interest rate cap, however, say Ponti’s measure does not speak to payday loans’ real problem: high interest rates that cause people to keep taking out new loans.

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House members kill bill to cap interest rates on payday loans …

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A move to cap interest rates on payday loans was shot down in the House Commerce Committee Monday afternoon.

Payday loan reform is one of the hot button issues this session at the Louisiana State Capitol. Payday loan industry leaders have spared no expenses in hiring lobbyists to protect current payday laws.

However, consumer groups and other interested parties are lining up against the payday loan industry.

“You might not make this mistake, you might know better than this, but think about your elderly parents, think about your adult children,” said Diane Hanley with Together Baton Rouge. “It will happen to our adult children. It will happen to our elderly relatives. It happened to mine.”

HB 239, which is sponsored by state Rep. Ted James, D-Baton Rouge, was designed to cap a maximum of 36 percent on any short term loan. The House Commerce Committee voted 10 to 8 to kill the bill.

Rep. James voluntarily deferred the bill.

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