Democratic Louisiana Gov. John Bel Edwards has vetoed new legislation that would have imposed undue hardship on the state’s residents who take out payday loans.
Senate Bill 381 was sponsored by Republican Sen. Rick Ward, who said it would help those using the loans to meet higher-than-expected expenses. The legislation would have offered installment loans up to $1,500. However, with fees and interest, the amount owed or principal could increase by 100% The lawyer.
The report notes that with a “maintenance fee” of up to 13% of the original loan amount, a $1,500 loan could have a $195 per month fee.
Edwards agreed with the bill’s critics, who complained that the predatory loans had further trapped those on low incomes in debt cycles. In his veto memo, Referring to Ward, he writes, “Despite the best efforts of the bill’s author, I do not believe this bill will adequately protect the public from predatory lending practices.”
“I’ve long been opposed to payday loan products,” Edwards added, “which aim to keep vulnerable people in debt, often paying exponentially higher interest rates than would otherwise be available from commercial banks.”
The governor said he “would be willing to support and sign legislation reforming payday loans so that interest rates and fees are adequately protected.”
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The lawyer noted that Senate Bill 381 would not have replaced or reformed the existing system. Instead, it would have created a new product with monthly payments over a period of three to 12 months.
After research by the pew trust, “Black people make up about 13% of the entire American population, but they make up 23% of all payday loans in business.”
Bank Notes that many payday lenders rely on repeat customers, both in-store and online, noting that “repeat customers are also desirable because they default on loans at lower interest rates than new customers. Industry analysts estimate that even if an online lender charges a fee of $25 per $100 per payment period, the customer would need to borrow at least three times to make a profit.”
The University of North Georgia notes that many families using payday loans are unbanked and underbanked and are disproportionately black or Hispanic, recent immigrants, and/or undereducated. The university has a Student Money Management Center that helps students set up emergency savings funds and financial plans.
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