CONCORD, N.H. – Gov. John Lynch on Friday vetoed a bill that would have allowed payday loan lenders to skirt New Hampshire’s new 36% interest rate ceiling and charge more than 400% APR.
Many of the payday lenders left the state after lawmakers capped interest rates on the short-term loans at 36%.
The bill would have created a new small loan product in New Hampshire – an installment loan – and overturn the interest rate cap for payday lenders. “These new installment loans,” said Gov. Lynch, “are essentially payday loans that would create an escalating spiral of debt for New Hampshire families that would undermine their financial security, as well as the financial well being of our communities and our economy.”
The bill would have allowed a short-term lender to charge nominal interest of $15.50 per $100 installment, but the installments could be up to 26 weeks, resulting in annual rates of more than 400%. On a six-month loan with payments every two weeks, lenders would be able to charge consumers more than $1,100 to repay a $500 loan.
Earlier this year, lawmakers overrode Lynch's veto of a similar bill doing away with the 36% interest cap on auto title loans.
