Oklahoma is already a favorable market for the payday loan industry. The Sooner State has more than 300 payday stores, which can charge customers $45 on a two-week loan of $300.

But now the controversial industry is pushing a legislative measure that would make Oklahoma even friendlier territory. A bill passed Thursday by the state Senate would allow lenders to offer installment loans of up to 12 months at rates far higher than they can charge now, while leaving unchanged the rules for shorter-term payday loans.

The legislation now heads to the desk of Republican Gov. Mary Fallin, who vetoed a similar measure four years ago.

Consumer advocates say that the Oklahoma legislation is part of a multistate lobbying push by the payday industry aimed at minimizing the impact of a federal crackdown, if and when that happens.

In Washington, the Consumer Financial Protection Bureau has proposed rules that would make it difficult for payday lenders in any state to offer the short-term loans that were long the industry’s staple. It is unclear whether those rules will ever take effect, given the strong industry opposition that the proposal has generated and the precarious status of CFPB Director Richard Cordray.

Still, payday lenders are not taking any chances. The Center for Responsible Lending, a national consumer advocacy group, said that measures similar to Oklahoma’s were introduced this year in seven other states, though none of those other bills have been sent to the governor.

The bills introduced in various states this year are part of a broader trend in which the payday lending industry has been pushing state legislatures to authorize high-cost installment loans. A 2016 report from the Pew Charitable Trusts found that high-cost installment loans were available in 26 of the 39 states in which payday and auto title lenders operate.

“This is essentially prepackaged, cookie-cutter legislation that is helping to advance the payday lenders’ agenda,” said Diane Standaert, director of state policy at the Center for Responsible Lending.

The Oklahoma Legislature’s website lists Rep. Chris Kannady and state Sen. James Leewright, both Republicans, as co-authors of the legislation.

But when contacted for comment, the lawmakers’ offices referred questions to Jamie Fulmer, an executive at Advance America, a Spartanburg, S.C.-based payday lender that operates more than 60 stores in Oklahoma.

After Fulmer was told that the lawmakers’ offices referred questions to him, he said, “I don’t know why they did that.”

When asked whether Advance America wrote the Oklahoma legislation, he responded: “Certainly we provided input. We’ve got a lot of perspective from being in the industry.”

He added that other groups also offered input regarding the legislation, which he said would give consumers who need credit an additional choice.

“The customer always benefits when there are more options to choose from,” Fulmer said.

Later, Leewright sent a statement to American Banker that said the bill "creates parameters for a small loan that is a much better product for payday loan borrowers than their current option." He added that the bill "decreases rates for payday loan borrowers, gives them longer to pay off their loans" and decreases their monthly payments.

The legislation would substantially increase what lenders can charge for a one-year installment loan in Oklahoma.

State law currently allows fees of $400 on a $1,000 installment loan with a 12-month term, according to an analysis by the Oklahoma Policy Institute, which opposes the legislation. Under the pending bill, lenders could charge $1,405, which translates to an annual percentage rate of 204%, the analysis found.

“This bill was drafted and lobbied aggressively by the payday loan industry,” the Oklahoma Policy Institute said Thursday in a written statement. “By creating another predatory, high-cost loan product, this bill will put more Oklahomans in deep financial distress.”

Gov. Fallin’s office declined to comment on the legislation, citing a policy not to comment on pending bills until after she and her staff have had a chance to review the final version.

But in 2013, Fallin vetoed a bill that would have allowed lenders to charge more for consumer installment loans.

“Data reveals that this type of lending has resulted in widespread, chronic borrowing where the average Oklahoma customer borrows often, rapidly and at a high cost,” Fallin said in a written statement at the time. “Data also indicates that these loans are used for regular spending and to band-aid chronic financial problems, not for occasional emergencies.”

The legislation passed the Oklahoma House 59-31 and the state Senate by a 28-to-16 margin. Two-thirds majorities in each chamber are needed to override a governor’s veto.

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Kevin Wack

Kevin Wack

Kevin Wack is a California-based reporter for American Banker who covers the U.S. consumer finance industry.