DOVER, Del. — A bill to regulate and watch payday loans in Delaware vacant a Senate committee Wednesday even with strenuous objections from lobbyists and representatives of the payday loan industry.
Opponents warned the Senate Banking Committee that the bill would do modest to help consumers but instead would leave them with fewer financial options and could force lenders to lay off employees and go to other states.
Payday loans typically are small, fleeting-term loans with high interest rates that effectively represent advances on a borrower’s next paycheck. While borrowers usually see them as a fleeting-term fix to make ends meet, critics say high interest rates, combined with frequent loan rollovers, often leave borrowers trapped in a cycle of debt.
Unlike previous failed proposals to regulate the industry, the contemporary bill, which narrowly survived a House vote two weeks ago, does not cap interest rates for payday loans.
Instead, it limits borrowers to no more than five payday loans of $1,000 or less in a 12-month period, and lenders to no more than four rollovers of an existing payday loan.
One of the bill’s more contentious provisions calls for the creation of a database that would be overseen by the state and which lenders would use to determine whether a potential borrower already has an outstanding payday loan.
Robert Byrd, a lobbyist for South Carolina-based payday lender Advance America, said the industry was not consulted before the bill was introduced and has been unable to get to a compromise with chief sponsor Rep. Helene Keeley, D-Wilmington, and other proponents of the bill.
“We don’t reckon it should be the business of the legislature to limit the choices for consumers as to what they can and can’t do,” said Byrd, adding that borrowers often turn to payday lenders after exhausting other options.
“They have no place else to go,” he added, suggesting that borrowers will turn to loan sharks if they can’t get the loans they need from payday lenders.
Carol Stewart, vice president of government affairs for Advance America, said the companionship’s typical customer makes about $54,000 a year, has gone to college, and may be living paycheck to paycheck.
Stewart suggested that payday lenders are a viable option for people who don’t want to risk the financial penalties for bouncing checks or paying bills late, or reconnection charges for utilities that have been turned off for nonpayment.
“They look at their options and make an educated pronouncement,” she said.
Laird Stabler III, a lobbyist for Cash Advance Plus and the Consumer Lending Alliance, a trade group that includes payday lenders, noted that that the database lenders would have to use would contain sensitive information about customers, including Social Security numbers. He said the lenders should be afforded some indemnification or immunity from liability if a security breach results in identity theft.
In a letter to committee members, Keeley, the primary sponsor, noted that the Justice of Concord Court system reported that payday lenders filed more than 2,400 cases for payday loan defaults last year. As of April, there have been more than 1,000 cases filed this year, she added.
“Even payday lenders have repeatedly acknowledged that payday loans are harmful if used long-term,” Keeley wrote. “When meeting with citizens throughout our state, it is appalling to see how a fleeting-term loan product is becoming a long-term debt trap for so many of our constituents.”
The bill, which passed the House with only one more vote than needed for the required three-fifths majority, now goes to the Senate.
Article source: http://www.therepublic.com/view/story/c0a859e71ca942c2949f784de12dd7d8/DE-XGR--Payday-Loans/
