Under House Bill 289, Delaware borrowers would be limited to five payday loans of $1,000 or less in any 12-month period, including loan rollovers or refinancing. HB 289 would also create a database to track the number of payday loans a person has obtained.

Excerpt from State of Delaware’s website:

This bill limits to five the number of short-term consumer loans (sometimes called payday loans) that any one borrower may obtain in a twelve month period. It changes the definition of short-term consumer loan to include loans up to $1000 rather than $500. The bill also provides for establishment of a database to track the number of short-term consumer loans an individual has obtained in a twelve month period. Finally, the Banking Commissioner is directed to provide a report on the prevalence and nature of these payday loans to the General Assembly.

HB 289 has been assigned to the House Economic Development, Banking, Insurance and Commerce Committee.

From State Senator Don Benton, (Ranking Minority Member), Washington State during the hearing SB 5547, Senate Committee On Financial Institutions, Housing & Insurance, Washington State, February 16, 2011:

“The fact remains that for the many years that I sat on this committee and considered bills concerning payday lending, the bottom line is we ask DFI every year for the number of complaints they received. There were none, none. Repeatedly year after year we could find no evidence of complaints [through] DFI. Now that has certainly changed in the last year, because now DFI reports that the Washington law that limits eight payday loans per year, now they’re turning to unlicensed Internet payday lenders and here are the complaints. Hundreds of them. Not one before the law, now all of these after the law. … Now I would rather have my constituents doing business with a licensed regulated entity that DFI can control. But we have no way of regulating out of state or out of country [lenders].”

Several stories this week have surfaced on this issue, and for a Friday we thought you might want to watch some video coverage. As mentioned in the story, the latest report out of the DFI in Washington shows that, of the licensed entities of which the DFI tracks, consumers paid $122 million dollars less in payday loan fees than they did in 2009. But what we want to know is whether or not these numbers include unregulated entities? Does the DFI accurately portray the full lending picture in Washington?

Such restrictions on payday lending would merely force consumers to use higher cost providers, some of which are unregulated and unlicensed. In the wake of the Washington state restriction, some regulators and legislators said that they have seen an increase in consumers turning to unlicensed and unregulated lenders who may operate beyond the reach of state regulators.

Unlicensed lenders are not accountable to the state either through state examination or compliance standards. DFI’s enforcement chief said that even if the agency can get a subpoena to go after an illegal lender, it’s difficult to get a response and difficult to enforce the subpoena because the lender is either out of state or in another country.[1]

Wisconsin’s Supreme Court will be hearing a case on whether or not state law permits judges to determine when payday loan interest rates are too high, according to GazetteXtra.com.

As a reminder on CFSA Best Practices:

• CFSA members always provide the most transparent application forms and fee descriptions. We strongly support applying these to all other short-term lenders, both bank and nonbank.

• Members are required to disclose the cost of the service fee in both dollar amount and as an APR on loan documents and informational brochures. In addition, members must post fees in large type on posters in all store locations to ensure that customers know, in simple terms, exactly what the fees are before, not after, they enter into a transaction.

Installment lenders in today’s Kansas City Star rightly point out that a proposed ballot initiative in the state amounts to an all-out assault on consumer credit that would impact banks, credit unions, and others. We seen this before — righteous, but misguided efforts to help borrowers actually drive them to more expensive and credit-damaging alternatives…

“Removing installment loans as an option for borrowers will force them to look to black market sources or unregulated Internet lenders for the money they need. This must not happen. If Missouri must deal with payday lenders, it must do so in a significantly more targeted way.”

KC Star editors apparently don’t understand that a 36 percent APR cap would eliminate short-term loans in Missouri. Still, some readers understand the provision would deny credit to those who need it most, and that the costs of payday loans are reasonable compared to short-term alternatives…

Personal finance story came out of the Sacramento Bee lamenting the criticism we always receive: High-cost, triple digit APR.

The payday loan industry … says they’re a lifesaver for cash-strapped individuals, especially in a choppy economy.

And we say, so what? Millions of customers across the country have used payday advances responsibly and appreciate having somewhere to turn when they need quick access to credit. Analysts estimate payday advances are used by 19 million American households.

The article also discussed a bill that would raise the limits on payday loans – from $300 to $500 – passing the state Assembly.

There are a couple things we want to keep in mind when it comes to restricting access to credit: Loan limits punish borrowers who have proven they can meet their financial obligations and discriminates against those who don’t have access to a wide range of financial options. Research shows that heavy-handed restrictions on payday loans have caused consumers to bounce more checks, pay more late fees, and experience more credit problems.

 

Continued coverage from the WoonSocketPatch.com.

According to the article:

CRL estimates that $3 million per year is being sucked out of the Rhode Island economy by nationally run payday loan companies, such as Check ‘N Go of Ohio and Advance America of S.C.

IHS Global Insight conducted a comprehensive study analyzing the economic impact of the payday loan industry nationally and in states with storefront locations. Findings illustrate “measurable and significant” economic benefits to local economies directly through employment, compensation and taxes, as well as through indirect and induced relationships with suppliers and other industries.

SOME KEY FINDINGS:

The industry contributed over $5 million to Rhode Island’s gross state product (GSP) in 2007.

The payday lending industry supports 74 jobs1 in Rhode Island, including 42 people directly employed in13 storefront locations.

• The industry indirectly created another 10 jobs in supplier industries.
• Payday loan store and supplier industry employees induced the creation of 23 jobs through the purchase of goods and services using earned wages.

In Rhode Island, the total labor income impact from the payday loan industry is nearly $3.2 million:

• Through direct employment, payday loan stores contributed $1.7 million in labor income.
• Suppliers to the payday lending industry contributed $480,000 in labor income as an indirect result of the revenues generated by the payday loan industry.
• $1 million was generated from the wages of payday loan store employees and supplier industries’ employees as they were spent in Rhode Island’s economy.

A bill moving through Rhode Island could restrict access to credit for consumers in the state.

Part 1 of a story coming from the WoonSocketPatch.com:

A House bill (H5562) sponsored by Rep. Frank Ferri (D-Warwick) would repeal payday lenders’ special exemption, cap payday loans at a 36 percent annual interest rate …

Evidence shows that states that have seen restrictions, such as interest rate caps, access to short-term credit has all but vanished. Such a prohibition would drive licensed and regulated entities like CFSA members out of the marketplace and drive consumers to higher cost providers, many of which are unregulated and unlicensed.

The best way to protect consumers is to ensure that they understand the actual cost of the loan. And when you take a look at the other short-term products out there, consumers can make an informed decision for themselves. A payday advance compares favorably to many consumer alternatives, even when expressed as an APR for two-week terms:

• $100 payday advance with a $15 fee = 391 percent APR
• $100 bounced check with a $28 overdraft protection fee = 730 percent APR
• $100 credit card balance with a $35 late fee = 913 percent APR
• $100 bounced check with $60.47 Non-sufficient funds and merchant fees = 1,577 percent APR
• $100 utility bill with $46.16 late/reconnect fees = 1,203 percent APR

A day after passing through the Texas Senate, the House has followed suit and approved of the Senate version of House Bill 2592. If passed, the bill that now just awaits the signature of Governor Rick Perry will require more extensive disclosure from payday lenders in Texas. House Bill 2594, which requires payday lenders to be licensed by the state, still awaits final House approval.

Payday lending could soon become more transparent for borrowers looking for money fast — the House today concurred with the Senate version of a bill that would require payday lenders to disclose interest rates and fees associated with the loans.