Even after lawmakers worked hours overnight to craft an amendment to a controversial bill regulating payday and subprime loans, opponents remained frustrated, saying communities will be oppressed if the bill continues to gain traction.
With the words “USURY IS EVIL” emblazoned on her shirt, Mary Blackburn of the Indiana Friends Committee on Legislation stood defiantly in front of the House Financial Institutions Committee on Tuesday as lawmakers filed into their seats.
“Do you see this?” she said, pointing to the message on her shirt. “I want you to see this.”
Usury, a term that formally refers to immoral money lending practices that harm consumers and can be traced back to the Bible, is what Blackburn and her colleagues said will prevail under Senate Bill 613, which passed out of the committee in a 7-3 party line vote.
Rep. Woody Burton, the Greenwood Republican who is chairman of the committee, opened the hearing by saying he and his colleagues worked on their promised amendment to SB 613 until about 3:45 a.m.
While Burton and the amendment’s author, Rep. Matt Lehman, R-Berne, said the 17-page amendment mitigates abuses in the payday loan industry, it still protects a several new types of loans that would be made available to Indiana consumers if the bill becomes law.
— Lowers the maximum loan interest rate for new small-dollar loans from 99 percent to 72 percent, the current minimum rate for felony “loan-sharking” products and decreases the loan cap from $4,000 to $3,000;
— Extends the borrowing cool-off period from seven days to 15, which would limit how often lenders can authorize new loans to consumers;
— Prohibits lenders from collecting a borrower’s property, like a car title, to help pay off debt.
Democrats on the committee continued to oppose the bill and said the amendment wasn't enough to ease potential harm to borrowers.
Consumer advocates had much preferred an earlier version of the bill that would have capped two-week “payday” loans of up to $605 at an annual percentage rate of 36 percent.
“The concern here is so significant. We can have a very negative impact on countless Hoosier families,” said Rep. Carey Hamilton, D-Indianapolis. “The human toll is really unaccounted for, and I think if we go down this road and try to fix it later, we’ve hurt a lot of folks in the meantime.”
Lehman, however, said the bill and its amendment provide a stronger framework for the high-risk loan industry.
“I’m with you. If these products become abused, I’ll be the first to help you rein them in,” Lehman said.
Rep. Robin Shackelford, D-Indianapolis, asked Lehman if he could estimate how many borrowers tend to default on the new loan products in states where they are in use.
Lehman said he didn’t have figures available for defaults, but he noted that 60 percent of consumers were deemed ineligible for the loans and that 40 percent of successful borrowers fell behind on their loan payments.
“That doesn’t help them build their credit,” Shackelford said.
She also argued that the origination fees of up to $100 which are allowed in the amended bill, coupled with the interest rates, were unfair to consumers.
“We’ll have to agree to disagree,” Lehman said. “I think that’s a fair amount for them to charge for them putting their capital at risk.”
After the committee voted to advance SB 613 to the House, consumer advocates quickly condemned the outcome.
“It is so disappointing to see our lawmakers ignore the calls by Hoosiers to lower these loans to 36 percent interest and stop the payday lending debt trap, and instead side again and again with these out-of-state lenders,” Erin Macey, senior policy analyst for the Indiana Institute for Working Families, said in a written statement. “This bill is about expanding industries that profit from trapping people in cycles of high-cost debt.”
And Joshua Curry, an Indianapolis resident also attending the committee with the Indiana Friends Committee on Legislation, said he wondered if lawmakers understood the language in the amendment, released to the public less than an hour before the hearing.
Burton declined to allow the public to testify on the amendment, citing the hours of previous testimony.
“They strained to understand exactly what it was they were passing, in terms of the infrastructure, in terms of the payments, in terms of the technicalities,” Curry said after the hearing. “If they’re not in a position to understand it, why are they ushering it through?”