A Washington state law that restricts payday loan marketing to poor families has caused the state’s payday lenders to lose three-quarters of their business in the five years since it was enacted, according to published reports.

Total payday loans have plummeted from more than $1.3 billion in 2009 to $331 million in 2013, the last year for which figures are available, according to the Washington Department of Financial Institutions. The number of payday-lending stores has shrunk from 494 to 174 over that period.

Current law limits payday loans to $700 per loan. Borrowers are charged a $95 fee and the full amount typically is due in two weeks. State law limits borrowers to a maximum eight loans a year.

The payday loan industry, led by Seattle-based Moneytree, is lobbying lawmakers to change that law. They support revamped legislation that would eliminate traditional two-week payday loans and replace them with installment-type loans stretching repayment to as long as one year. The plan has gained bipartisan support, with backers believing it would revive the short-term lending business and allow consumers access to more affordable credit. Their plan is modeled after a Colorado law. 
Supporters of the bill argue they only want to balance protecting low-income consumers from scams with giving them a way to receive needed short-term credit. State Sen. Marko Liias, a Democrat and sponsor of the Senate version of the revamped proposal, said he isn’t a fan of payday loans but believes legislation has gone too far and cut off some people from accessing emergency funds.

 The installment-loan proposal, contained in  House Bill 1922 and  Senate Bill 5899, would allow customers to borrow up to $1,000 for at least one year. A $700 loan under that system would cost borrowers $495 in interest and fees if held for six months. If the loan were paid over a full year, borrowers would pay $879 in interest and fees.Unlike payday loans, which charge fees up front, the installment loans gradually would accrue interest, giving borrowers an incentive to pay them off early. For example, a $700 loan paid back in two weeks would cost just $38 in fees.

Moneytree CEO Dennis Bassford is frustrated by the opposition to the proposal. The Colorado law it mimics has been praised by some of the same consumer advocates bashing the idea in Washington, he said. A similar installment-loan proposal was defeated by critics in the Washington Legislature two years ago.

The revamped legislation is headed for a possible floor vote next but revisions to it could come beforehand. A timeline for voting on any new law has not been set.    


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