Sunday, March 18, 2007

Despite much sound and fury, it appears legislators will do nothing this year to crack down on controversial Washington payday loan lenders.

“None of the payday bills are going. They’re dead,” said state Rep. Sherry Appleton, a Poulsbo Democrat who wants to cap payday interest rates.

Payday advances are small, short-term advances offered at high interest to people who need money fast before their next paycheck. Critics charge that the loans trap the working poor in a cycle of debt, while proponents argue the thriving industry provides a needed service.

The payday stores seems to be on every street in some parts of Tacoma. The biggest concentration in the state is in the South Tacoma and Lakewood legislative district of Rep. Steve Kirby, a House committee chairman who killed Appleton’s payday bill.

Kirby said Appelton’s proposal to cap annual percentage rates at 36 percent would have driven the industry out of business. Kirby offered less dramatic faxless payday advance measures, but none made it to the House floor before a key deadline on Wednesday.

“To some people this was an all-or-nothing deal,” Kirby said. “And around here that’s a really good way to end up with nothing.”

Payday cash loan lenders are allowed to charge a maximum fee of 15 percent. That amounts to a $75 fee on a $500 loan, which pencils out to an annual percentage rate of 391 percent on a 14-day loan.

Kirby had pushed a bill to let payday borrowers have a 60-day payment plan once a year at no additional cost.

It’s similar to a change that a national instant payday loan lending trade group is voluntarily adopting in order to beat back moves by state legislatures across the country to clamp down on the industry.

Kirby and Appleton had also co-sponsored bills to create a financial literacy program for borrowers and to study putting together a database to track the loans. Kirby has said that creating a database could allow payday lenders to see if a borrower has multiple loans out. A database could set the stage for a future law putting limits on how many loans a borrower can have out at one time, he said.

But Appleton said her enthusiasm for the database bill flagged because she doesn’t want providers of instant cash loans to get names of all the borrowers.

Appleton was also upset that Kirby’s financial services committee watered down her bill to educate borrowers. The original version, which Kirby co-sponsored, would have required lenders to pay a 25-cent per-loan surcharge to pay for the financial literacy programs.

The committee knocked the charge down to 10 cents a loan. Appleton said that wouldn’t be enough.

“That’s a joke as far as I was concerned,” she said.

Kirby said the change was necessary to get enough support to pass the bill from his committee. It didn’t matter in the end, though, because the next committee in line killed the fast payday advance bill.

Cash advance lenders are major campaign contributors to legislators. They also have defenders. Niger Innis, national spokesman for the conservative Congress of Racial Equality, came to Olympia last month to testify.

“Payday lenders offer a choice that is not widely provided by traditional lenders anymore,” he said. “Consequently, we think that payday lenders provide a choice that members of our communities should be allowed to make.”

SOURCE: The News Tribune

This entry was posted on Sunday, March 18th, 2007 at 11:22 am and is filed under Washington.