By Jonathan Kaminsky Associated Press
OLYMPIA — A Washington state House committee heard testimony Wednesday on a bill to allow a new type of low-dollar, high-interest loan pushed by the payday lending industry.
The measure heard Wednesday in the House Business and Financial Services Committee would allow for loans of up to $1,500 that must be paid off within a year. A borrower paying off such a loan on time would pay slightly more than 100 percent of the principal in interest and fees.
Rep. Steve Kirby, the committee chairman and a bill supporter, said it would help those in a financial jam get access to cash that doesn’t have to be repaid as quickly as a payday loan. He acknowledged that the terms are not generous to borrowers.
“I am not going to sit here and tell you this is a cheap low-interest loan,” said Kirby, D-Tacoma. “It’s not.”
Kirby said it was likely the bill would pass out of his panel, though he hoped to win over more Democrats before advancing it.
The Senate passed a version of the bill last month, but the version before Kirby’s committee includes more consumer protections. Among those are reducing the length of the loans from 18 to 12 months, limiting the number of loans one person can take out to 12 per year, and barring members of the military from being eligible for them.
The interest rate and fees are unchanged from those in the Senate version, however. They include 36 percent annual interest, a monthly fee of 7.5 percent of the full loan amount that is capped at $90 dollars per month, and an upfront fee of 15 percent of the loan, up to half of which is refundable if it is repaid early.
Bill opponents say the new loans would amount to an end-run around a 2009 state law that reined in payday lending practices. Under that law, payday lenders can only lend up to $700 at a time, and the loans must be repaid within 45 days.
Opponents added that poor people should have more access to credit, but it should be reasonably priced.
“If it’s too dangerous for the military, why isn’t it too dangerous for Washington?” said Bruce Neas, an Olympia-based attorney with Columbia Legal Services.
Supporters of the measure say the loans are a better short-term deal for borrowers than payday loans, and they will allow companies with a physical presence in Washington state to compete against online lenders who they say are gaining market share.
Dennis Bassford, CEO of Moneytree Inc., a Seattle-based payday lender and check casher that is helping promote the bill, said his adversaries are predisposed to oppose his industry.
“There are certain groups that are opposed to the lending industry in general,” he said. “I think they become blinded” even when a good product is put forward.
Bassford did not appear to win over skeptics, however.
“Who needs this product? Is it an outcry from the consumer?” demanded Peter Zimmerman, a Seattle-based advocate for the poor. “I don’t think so.”