Bill to Regulate Short-Term, Small Dollar Loans Fails
The payday loan industry won’t face further regulation after legislation in Pierre floundered in committee. The measure sought to place restrictions on the industry, including a cap of the amount of money that could be borrowed. Representative Steve Hickey is the prime sponsor of House Bill 1255. But the bill failed to garner industry support.
Members of the House Commerce and Energy committee listened to almost an hour of debate before voting down House Bill 1255. Representative Steve Hickey says he attempted to create compromise in the bill between protecting consumers and the loan industry. He says his proposed measure would impact only payday, title and signature loan companies. Hickey says these are the loans that negatively affect consumers.
“In my estimation, at present, without this bill especially, we’re dealing with a defective product that’s intended to be a debt trap. It’s marketed to the financially unsophisticated, and I believe it’s been exploiting the poor, and the elderly, and those on the economic fringes of our society. One of the common complaints is, ‘Well, if they’re stupid enough to sign it.’ And, I would just say that my response to that anymore is desperate people, it’s not stupidity, they do things that you and I wouldn’t do if we weren’t in a state of desperation,” Hickey says.
House Bill 1255 would put a maximum loan cap of $700 on borrowers, and would also create a database all lenders would have access to, to monitor borrowers’ loan statuses.
The state banking division plus loan companies spoke in opposition to the legislation. They argue the industry is already regulated, and this bill would create more work and end up costing the state more money. Dan Henderson with Money Central says these companies provide a service to people who might not be able to go to the bank for loans.
“My concerns are that you’re taking a very well educated consumer—I loan to sheriffs, I loan to attorneys, I’ve loaned to numerous different types of people, they’re very well educated. We spell it all out on a contract. They know what they’re getting, they know what they’re signing. But you’re gonna take a choice away from them. You take a choice away from people that redirects them in desperation times, that’ll redirect them to the internet which I know this does not affect,” Henderson says.
Members of the House commerce committee agree more questions need to be answered on the subject before putting it into law. House Bill 1255 failed 11-2.