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In the Obama era, the industry turned to state lawmakers to make its case. That strategy doesn’t seem to be changing.
The running national battle over payday loans came to the Indiana Statehouse last week.
Under a crush of lender-lobbying, the House voted on Wednesday to allow payday shops in the state to offer new loans with interest rates of up to 222 percent—more than triple the annual rate currently categorized in Indiana as felony loansharking, The Indianapolis Star reported.
House Bill 1319 concerns loans between $605 and $1,500 that would have to be paid back in less than 12 months. The Indiana Institute for Working Families reported that a six-month, $1,500 loan would end up costing borrowers $2,378.
Arguments for and against the bill followed the same wildly divergent lines that have characterized legislative debate on payday loans elsewhere, offering up the kind of lines that draw applause on one side and gasps on the other.
Bill sponsor Rep. Martin Carbaugh, an accountant, told the Star the bill comes in response to consumer demand. The Fort Wayne Republican said he viewed the proposed new loans as tools that borrowers could use to build up their credit scores.
“We have a need for these things," he said.
Others said the bill promoted predatory business practices that have pushed vulnerable populations into proven debt traps.
“I’m all for helping people, but this bill is helping no one but the [loan] companies…,” said Rep. Robin Shackleford, an Indianapolis Democrat.
Consumer advocates have long pointed to the toll short-term high-interest loans take on yung military families, for example. Indeed, during the Obama administration, the federal Consumer Financial Protection Bureau brought out a series of reports on the problem of military short-term loan debt, detailing the way payday lenders, set up in groups just outside military bases, take in millions in fees and charge interest rates as high as 300 percent.
For its part, the payday loan industry has felt embattled and has turned to state lawmakers to make its case. The antipathy demonstrated toward consumer finance regulation by the Trump administration and by Republican leaders on Capitol Hill hasn’t seemed to change the statehouse-based strategy.
The Star reported that four major payday lenders spent more than $186,000 on lobbying at the Capitol last year and that at least some of the cash they’re spending this year has flowed to firms headed by two former Republican state lawmakers. The Indiana Legislature is already scheduled to consider at least two payday lending bills in the 2018 session.
Rep. Carbaugh’s bill passed on a 53-41 vote and is scheduled to be heard this week in its first Senate committee. Republicans enjoy supermajorities in both chambers of the Indiana state legislature.
John Tomasic is a journalist based in Seattle.
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