Lawmakers reject expansion of payday lending; decide to study issue this summer
By Brigid Curtis Ayer
INDIANAPOLIS — The Indiana Catholic Conference and other advocacy groups steered state lawmakers to reject an amendment expanding payday loans. Instead, lawmakers moved legislation to further examine the issue in a summer study committee with the hope of finding alternatives methods to help lower income persons borrow money while reaching self-sufficiency. The Indiana Catholic Conference supports the legislation to study payday lending.
The legislative action took shape during a lengthy meeting of the Senate Insurance and Financial Institutions Committee, Feb. 25, when lawmakers heard testimony on the payday lending bill, House Bill 1340. Attorneys representing payday lenders, and a few lenders who operate these financial operations highlighted the benefits of adopting an expansion of the payday lending industry to the Senate panel. Representatives of advocacy organizations who work with lower income persons testified before the panel about the negative impact expanding these types of loans would have on those they serve.
Weeks earlier, House Bill 1340 passed out of the House and came to the Senate as a bill which created a study committee on the payday lending industry. On the last day of regular committee hearings for the Indiana General Assembly, the Senate panel considered an amendment to change the bill from a study committee, to a bill to expand payday lending. The amendment, which resurrected controversial language that could not be agreed upon in the House, would have allowed expansion of the industry to lend installment loans up to $1,000 and at an increased annual percentage rate (APR) of up to 180 percent.
Heather Willey of the Indianapolis law firm Barnes and Thornburg who was representing short-term loan operators spoke in support of the amendment. She said that these types of loans potentially could have the benefit of helping low income persons who have poor credit to build their credit history so they could qualify for a more traditional loan. Other supporters of the bill said the legislation would help loan providers comply with new federal regulations soon to be promulgated.
Testifying in opposition to the amendment, Glenn Tebbe, executive director of the Indiana Catholic Conference, said the higher percentage rate would continue to do harm rather than benefit those people seeking short term loans. “Payday loans tend to trap people into a cycle of repaying initial debt.” He said it traps people into “exorbitant” interest rates. Tebbe said, “The majority of people using these loans are working, but have so low of pay they cannot take care of their everyday expenses. So they reach out for this type of cash to make ends meet. People who are in a vulnerable position and already experiencing financial distress are being taken advantage of.”
“We believe it’s the state’s responsibility to facilitate and protect the common good,” said Tebbe. “The weakest member of society should be protected against usury or any other type of exploitation. Economic choices and policies should be judged by how they protect and uphold the dignity of the human person, support the family and serve the common good.
“We don’t believe this amendment is in the best interest of the people or a way to help them reach self-sufficiency,” said Tebbe, “And would encourage you to not adopt this amendment, but to leave bill in the form it came out of the House as a study committee.”
Tebbe added that the bishops across the nation through organizations like Catholic Charities and Campaign for Human Development are actively working to provide alternative funding sources to assist people who need help.
Lucinda Nord, representing Indiana Association of United Way, who opposed the amendment, said she was supportive of this issue being discussed in a summer study committee. Nord did say she thinks there is a need for some type of alternative financial product available, but that the high interest loan was not one of them that would help people move to financial stability. She said she’d like to see an expansion of services that do help people move to self-sufficiency.
Lisa Wilken, representing American Veterans (AMVETS) described the amendment as the “wrong approach” to helping low income people. She said that she was speaking with a veteran on her way to the statehouse who said payday lending businesses are located outside of every military instillation. She said there are two or three right outside the gate. She added, many veterans find themselves living from paycheck to paycheck and are vulnerable to these types of loans.
The committee rejected the amendment 6-2, and passed HB 1340, which will create a summer study committee on payday lending practices. Tebbe said, “The ICC supports the study of the industry and its impact on the people of Indiana. If the bill passes the General Assembly this year, I’m hopeful the summer study will open up new opportunities for productive lending alternatives which move persons toward self-sufficiency.”