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Payday Loan Interest Rates: In NH, the Sky is Still the Limit

October 22, 2007

Concord, NH – The sky is apparently still the limit for payday loan interest rates. A New Hampshire House subcommittee has rejected a bill that would have placed a 36 percent interest rate cap on these short-term loans, in favor of alternatives drafted by lenders that allow rates up to 300 percent.

The industry claims capping the interest rates they're allowed to charge would put them out of business, and take away a resource that borrowers need. But Sarah Mattson, of New Hampshire Legal Assistance, says the loans trap customers in seemingly endless cycles of debt. She advises borrowers to think about how they'll 'pay up' when the loan comes due, without having to borrow more money.

"When I get my paycheck and have to pay back the $600 payday loan, how am I going to do that -- and pay the rent, and pay for the food that my family needs?"

Mattson says state lawmakers must craft protections to ensure that payday loan customers are able to work their way out of the debt that the loans create.

"We need action at the legislative level, because the nature of the product is such that people can't get out. It's designed to trap them."

Mattson says consumer advocates will push for a number of changes when the full House takes up the bill in the next legislative session. In the meantime, two New Hampshire credit unions have announced plans to make short-term consumer loans, without sky-high interest rates, as alternatives to payday lenders.

John Robinson/Eric Mack, Public News Service - NH