Payday Loan Interest Rates Remain Uncapped

Wednesday, 25 February, 2009

House lawmakers failed to revive a bill that would put a cap on payday loan interest rates. The attempt failed with a 51–49 vote. House Bill 396, sponsored by Rep. Bill Wilson, D-Great Falls, would limit interest rates to 36 percent on both payday and auto loans.

The bill was tabled in the House Business and Labor committee on a party-line vote, 9–9. It would need 60 votes from House representatives to force it out of committee deadlock and onto the House floor. The bill should be debated on the floor, according to Wilson, because Montanans are going further into debt due to exorbitant interest rates, which can exceed 400 percent annually.

“These people are trapped,” Wilson said. “They are paying interest rates that, in my opinion, would make (TV mobster) Tony Soprano embarrassed.”

Rep. Shannon Augare, D-Browning, said payday loan businesses need more regulation because they are built on the same kind of greed that put America in the current economic crisis. But opponents of reviving the bill said putting more regulations on this industry will only hurt its employees and the people who use the services.

“The purpose of this bill is not to cap interest rates,” Rep. Mike Milburn, R-Cascade. “It’s to put people out of business.” Milburn added that forcing these businesses to close would force the people who work there out of their jobs.

Rep. Edward Butcher, R-Winifred, said payday loans are often the only opportunity some low-income people have to borrow money for emergencies. Paying $10 worth of interest on a $50 loan is cheap compared to a $30 charge for bouncing a check at a bank, he said.

“Until you’re going to go ahead and require banks to loan money to people that have no assets, you better not take away this one avenue,” Butcher said. “What do you want them to do, go sell their body on the street to get the money?”

Source: montanakaimin.com