Payday Lenders Back New Loan Type for WA Borrowers
Wednesday, March 4, 2015
OLYMPIA, Wash. - Bills to expand payday lending options in Washington have emerged from House and Senate committees, despite objections from advocates for low-income borrowers, seniors and the Washington attorney general.
The bills, HB 1922 and SB 5899, would create a new type of six- to 12-month installment loan for amounts up to $1,000. The lender gets a 36-percent interest rate, an origination fee of 15 percent of the loan amount and a monthly maintenance fee of 7.5 percent.
Add it up, said Marcy Bowers, executive director of the Statewide Poverty Action Network, and the result is a more expensive loan without the protections of the state's current payday lending law.
"They're saying that this would get rid of payday lending - which it would, technically," she said. "It would just replace it with something that's confusing and expensive, and would be better for payday lenders, but not better for consumers."
Bowers said the payday-loan industry has backed similar legislation in other states that have tried to set tougher limits on what they can do and charge. Washington added safeguards for payday loan customers in 2013. State Attorney General Bob Ferguson said borrowers don't need a new type of loan, and the state's payday lending law doesn't need an overhaul.
More than 70 consumer groups have signed a letter opposing the new type of installment loan, including AARP Washington. Mike Tucker, its volunteer president, said they took a stand because, statewide, one in five payday loans is taken out by someone age 55 or older.
"Let's recognize that a significant portion of the population of seniors are living on fixed incomes," he said. "And so, it's not surprising to me that the numbers for seniors using payday loans is as high as it is here in the state of Washington."
Last month, Tucker told a Senate committee that AARP research has shown that the more debt people have, the more difficulty they have making financial decisions and resisting scams.
The bills to create the new installment loan are now in the Rules Committee.
Text of the legislation is online at apps.leg.wa.gov.
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