Two state Senate committees offered drastically different outcomes Wednesday for payday lenders in Louisiana.
The Senate Committee on Commerce, Consumer Protection and International Affairs advanced the payday loan industry-favored House Bill 766. HB766 would make loans unenforceable unless creditors get licenses from the Office of Financial Institutions. The requirement would force online lenders to play by the same rules as creditors with brick-and-mortar locations in Louisiana.
The bill’s sponsor, state Rep. Erich Ponti, said the legislation would help borrowers by also removing the authority for one-time delinquency charges. “It gives them that out to break that cycle of debt,” said Ponti, R-Baton Rouge.
Hours later, the Senate Finance Committee left lenders — in one lobbyist’s words — feeling like a bug smashed against a windshield. The committee advanced Senate Bill 84 to limit consumers from taking out more than 10 payday loans in a year.
“This is a huge step forward in trying to protect the people of Louisiana from predatory lending,” said the bill’s sponsor, state Sen. Ben Nevers, D-Bogalusa.
Troy McCullen, president and CEO of Finance America Business Group, which owns 31 Cash-2-U lenders across Louisiana, including locations in Baton Rouge, Zachary and LaPlace, had a different take on SB84.
“A 10-limit cap puts probably 70 percent of the industry out of business,” McCullen said.
The committees’ action puts dueling legislation into play. Both bills are bound for the Senate floor.
Borrowers are generally charged between $20 and $55 for each transaction, and are subject to rates that reach as high as 700 percent when calculated annually.
Legislative efforts to cap the annual cost of the short-term loans at 36 percent interest quickly died amid strong pushback from payday lenders and their lobbyists. AARP Louisiana and Together Louisiana supported the cap. Lenders oppose it.
The Rev. Edward Chiffriller reached into the book of Nehemiah on Wednesday to characterize today’s “payday” lenders as predatory against the poor.
In an ancient episode from the Bible, people complain they are having to borrow money on their fields and vineyards to pay the king’s tax. The debts couldn’t be repaid, resulting in the sale of property and the conversion of children into slaves.
The prophet Nehemiah responds: “I was very angry when I heard their outcry and these complaints. After thinking it over, I brought charges against the nobles and the officials; I said to them, ‘You are all taking interest from your own people.’ ”
Chiffriller told a small crowd on the State Capitol steps that modern religious leaders — like their historic predecessors — have heard the cries. Chiffriller and other leaders presented legislators with gifts of Bibles on Wednesday.
“So we’re here to take a page out of Nehemiah’s book, to deliver a message to our own ‘nobles and officials,’ to tell them, like Nehemiah did, ‘You are forcing your own people to pay too much interest,’ ” said Chiffriller, who pastors at St. Francis Xavier Catholic Church in Baton Rouge.
During the Senate Finance Committee meeting Wednesday night, Larry Murray, a lobbyist for Blake Enterprises, a Memphis, Tenn., company consisting of 10 finance businesses, told legislators that Ponti’s bill would do good things because it would regulate the online industry.
He said capping the number of loans allowed kills an industry. He compared his job as a lobbyist to ricocheting between being a windshield and the bug about to collide with it.
“I’ve been the windshield and I’ve been the bug, and I think I know what I am tonight,” Murray told the Finance Committee.