House advances ‘hillbilly venture capital’ bill pushed by payday loan industry

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The Indiana House on Wednesday evening voted to approve a bill favored by the payday loan industry that advocates say would allow people with poor credit scores secure longer-term, higher-value loans than is typical for the industry.

House Bill 1319 was opposed by veteran groups, religious institutions and consumer advocates, who said it would expand high-interest, predatory loans in the state and allow lenders to charge an annual percentage rate of more than 200 percent.

The House voted 53-41 for the bill, which allows the industry to offer so-called unsecured consumer installment loans. The bill heads to the Senate for further consideration.

The proposed loans are made on a three-month to one-year basis in amounts ranging from $605.01 to $1,500. In earlier discussions of the bill, the loans were referred to as "hillbilly venture capital."

Rep. Martin Carbaugh, R-Fort Wayne, the bill’s author, said the concept for the new product was “brought to me by the small loan industry.”

“What we’re doing here is creating a new loan for people who have very low to no credit,” Carbaugh said. “They can’t get credit cards, can’t get bank loans, and they have emergencies pop up.”

But the products would allow a borrower making $17,000 per year who takes out a $1,500 loan to pay nearly $1,800 in fees, according to Erin Macey, a policy analyst with the Indiana Institute for Working Families.

Rep. Carey Hamilton, D-Indianapolis, said she opposed the bill after hearing from myriad consumer and charity groups “who work with their boots on the ground in our communities.”

“They have seen time and time again that these products do more harm than good,” Hamilton said.

Rep. Matt Lehman, R-Crawfordsville, said even though he was skeptical of the payday loan industry, he would much rather have constituents getting loans from a regulated industry as opposed to other means.

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