A national organization that advocates for minorities has asked Gov. Bobby Jindal to veto a bill calling for mild restrictions to the payday loan industry.
The Center for American Racial Equality said Thursday House Bill 766 by state Rep. Erich Ponti, R-Baton Rouge, will create a monopoly for payday lenders by limiting other creditors, including those online, that do business in Louisiana.
“This legislation hurts minorities by taking away options that they want ... and ensures that the only choice they have will be to go to a payday lender,” Dwayne Carson, executive director of CARE, said in a statement.
Ponti’s HB766, which received final legislative passage Wednesday, would require all lenders serving Louisiana residents to register with the Office of Financial Institutions. Currently, only lenders with a physical address have to register.
It would also give borrowers the right to enter into an installment payment plan for no extra fee if they cannot pay back loans on time.
Jindal hasn’t taken a position yet on the bill.
During testimony, Ponti said the measure would bring online lenders under current regulation and help borrowers avoid late fees. He didn’t immediately return a call for comment Thursday about the veto request.
Carson said the new requirements would hurt competition by discouraging online lending.
“Anyone doing business over the Internet would be put out of business,” he said.
Carson said the center is a free market-based organization that opposes adding more restrictions to short-term credit. He said the payday loan industry backed Ponti’s bill to have a “virtual monopoly” on short-term lending.
“This bill sets a dangerous precedent of using legislation to prohibit minority consumers from accessing e-commerce ... services,” he said.
Payday loans are short-term credit offered by stores at high interest rates.
Lawmakers proposed to restrict the industry with a cap on fees or the number of loans a borrower can take out a year. However, those measures failed while Ponti’s industry-backed proposal advanced.
Other critics of Ponti’s bill said the measure will not address the debt cycle caused by payday loans’ high annual interest rates. But Carson said CARE opposes capping fees and loans, arguing it should be the decision of the borrower if they want to borrow at those terms.
“They are smart enough to make their own financial decisions,” he said.
Instead, Carson said lawmakers should focus on expanding financial literacy, so borrowers can avoid getting into debt.