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During the week of June 16, in Washington, the Obama Administration released its Financial Regulatory Reform plan, which will remake the U.S. financial sector. The plan is focused on five big concepts but it’s too early to tell if consumers will be better off, since the plan does not include many details and there are still a lot of steps the Congress must go through to change the law. One thing is sure, everyone is focused on the fact that the plan would create a new government agency to regulate “consumer products,” but no one is sure exactly what that means and how much control the government would have over what you do and how you do it. Read About It »
There are currently five national legislative bills on that will impact short-term loans.
Senator Dick Durbin (D-IL) has introduced S. 500, a 36 percent rate cap bill that applies to all forms of consumer credit and will end up restricting the availability of credit to working, middle class consumers.
Representative Jackie Speier (D-CA) has introduced H.B. 1608, a bill to Amend the Truth in Lending Act to Establish a National Usury Rate for Consumer Credit Transactions. This is a companion House bill to Senator Durbin’s S. 500 which calls for a 36 percent rate cap and would take away access to short-term credit from hardworking Americans.
Congressman Luis Gutierrez (D-IL) has introduced H.B. 1214, The Payday Loan Reform Act of 2009. The legislation goes too far in establishing a national fee cap for one small segment of the short-term credit market – this would limit availability to credit and hurt consumers.
Rep. Joe Baca, (D-CA) , has introduced the Consumer Lending Education And Reform Act (H.R. 1846), which would amend the Truth in Lending Act to establish additional payday loan disclosure requirements and preempt certain state laws.
Representative Heath Shuler (D-NC) has introduced H.R.2563 , the Payday Lending Reform Act, which would amend the Truth in Lending Act to establish additional payday lending requirements including an extended payment plan, mandatory disclosures, and fee caps. This legislation would effectively protect consumers while preserving the availability of payday loans.
Below are states that have pending legislation that deal with short-term loans.
The 2000 law that allowed payday lending is set to expire in July 2010. Unless legislation is passed to preserve the industry, payday lending will cease to exist in Arizona at that time.
California is considering legislation that would raise the maximum amount of a payday loan from $300 to $500. The legislation would also require lenders to offer borrowers an extended payment plan. The bill passed the Assembly and has been referred to the Senate Judiciary Committee.
Rep. Mark Ferrandino and Sen. Chris Romer have introduced legislation that would let Colorado voters decide whether to cap interest rates on a short-term loan at 36 percent--a rate that would likely put Colorado cash advance stores out of business. If the bill passes, the issue will go on the November ballot for voter approval.
Rep. Jeff Greer, D-Brandenburg, chairman of the House Banking and Insurance Committee, has decided to wait until next year to have a hearing on a House Bill 381. The bill would have capped the annual interest rate on payday loans at 36 percent. Greer says he wants to give a new electronic system meant to monitor the payday industry time to work before considering new legislation.
Legislation has been introduced that would provide additional payday lending regulations to ensure that the lenders adhere to the 28 percent interest-rate cap which passed last November. This additional legislation is unnecessary and further restricts Ohio consumers’ access to credit.
A bill that sought to cap interest, penalties, fees and other charges on payday loans at no more than 36 percent failed to get enough votes in the House Commerce Committee and will not advance further. However, advocates of the bill are pushing for it to re-emerge in a tax bill. The Iowa Senate is reviewing a study bill, SSB 1307, which may limit Iowans’ access to regulated payday loans. The bill is pending in the Senate Ways & Means Committee and would require a state-wide database of loan customers, and limit the number of and length of loans.
Minnesota state lawmakers are considering a bill that would allow certain repeat customers to take advantage of easier terms so they can pay off their loans without having to borrow more. The strict terms of this bill would make it difficult for the industry to continue to effectively serve their customers.
Rep. Mary Still, D-Columbia, and Sen. Joe Keaveny, D-St. Louis, have introduced legislation that would increase the amount of time customers have to pay back short-term loans while capping the annual percentage rate for such loans at 36 percent. If this legislation passes, a 36 percent rate cap would likely eliminate cash advance stores in Missouri.
Legislation that raised loan limits to $550, limited consumers to one loan at a time and created a database to track loans passed in the House and Senate, but was vetoed by Governor Sanford. The House and Senate overrode the Governor’s veto, passing the bill into law in June 2009.
The Tennessee state legislature reviewed a bill that would cap monthly interest rates on title and short-term loans at 28 percent. This bill would make it impossible for short-term lenders to operate in the state, thereby eliminating consumers’ freedom of choice and access to credit for millions of Tennesseans. Lawmakers ended their legislative session without passing this bill.
The state legislature in Texas reviewed a bill that would cap interest rates on short-term loan products at 36%. Such a cap would effectively eliminate the payday industry in the state, thus dramatically reducing the available options for Texas consumers who need short-term credit help. Lawmakers finished the session without passing this bill.
In the spring the Washington state legislature passed and the Governor signed a bill that reforms payday lending in the state. It limits payday loans to 30 percent of a customer's monthly income, or $700, whichever is less. Customers who fall behind on their payments can request an installment plan to pay off the loan. And it sets up a database to track the number of loans customers take out and bars them from having multiple loans from different lenders.
The state Assembly approved a bill that would ban auto title loans, limit payday loans to $600 and prevent borrowers from taking out more than one loan at a time. The measure does not include an interest rate cap. The bill still needs to be passed by the State Senate and signed by the Governor before becoming law. Sen. Jim Sullivan,(D-Wauwatosa) expects the Senate to take action on it soon.
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