Legislation in Louisiana aimed at making payday loans cheaper for borrowers failed Monday in a House committee.
House Bill 239 sought to cap the annual fees charged for the payday loans at 36% interest. The annual percentage rate currently can top 400%. Louisiana House Commerce Committee members, apparently fearing the legislation would result in payday lenders closing down, rejected the bill by a 10-8 vote.
Organizations seeking to toughen rules on payday loans pointed to a report by the Louisiana Office of Financial Institutions that shows state residents shelled out $146 million in fees and interest on the loans last year.
The bills sponsor, state Rep. Ted James, said he will focus on revising a more payday loan industry-friendly bill that awaits a debate on the House floor. He said he believes aggressive lobbying on behalf of the payday loan industry led to the bill's defeat, reported The (Baton Rouge) Advocate.
James, D-Baton Rouge, wanted to cap the APR and ban lenders from holding a borrowers blank check as security for loans.
Payday lending reform has moved forward recently in several states, including Utah, Missouri and Idaho and the universal theme has been that the short-term loans are trapping borrowers. But, on Monday, Louisiana House committee member, Rep. Hunter Greene, expressed confusion about how payday loans are trapping borrowers.
You borrow the money. Youre going to owe it back. Its not complex, said Greene, R-Baton Rouge.
On the national level, the Consumer Financial Protection Bureau is finalizing the first nationwide rules for payday lending. The regulations will apply to an estimated 20,000 payday stores and many more online.