By Emily Ketterer
INDIANAPOLIS –– Lawmakers listened to four hours of testimony Thursday to determine how the legislature should handle the payday loan issue in Indiana.
The Interim Financial Institutions and Insurance Study Committee convened its first meeting of four scheduled throughout the fall on a number of topics, and the first issue focused on revising the consumer credit code. from Indiana.
This follows controversy over legislation introduced in the 2019 session that would have allowed lenders to charge interest rates at what were considered “loan request” levels – over 72% interest. . The bill died on the floor of the House in the spring after being narrowly passed by the Senate.
The consensus among committee members was to find a solution to help short-term loan borrowers repay their debts in a reasonable period of time rather than over a long period. Testimonials with suggestions from consumer advocacy groups and payday loan companies ran from mid-morning to late afternoon.
Indiana law authorized payday loans in 2002. The idea was to make small loans available to working Hoosiers who need a quick injection of cash but might not qualify or not. not wanting to take out a small traditional loan.
Consumer groups have argued for a 36% interest rate cap on loans, which was drafted in another bill during the 2019 session, but did not garner a vote.
Erin Macey, senior policy analyst for the Indiana Institute for Working Families, said data shows 82% of borrowers will take out another loan to make repayments on the first loan, which will shift loans from short-term to long-term. term.
“People find it difficult to manage the credit they have,” Macey said. “Payday lenders are positioning themselves as a quick and easy solution to these financial problems. Unfortunately, these end up like a ball and a chain.
Among the solutions presented was also the creation of a licensing system for short-term lending companies, said Lyndsay Miller, acting deputy director of the consumer credit division and general counsel for the financial institutions department of the ‘Indiana. She said the state would be able to better scrutinize companies’ legal documents.
“It would be beneficial to guard against the emergence of a predatory industry using consumer leases to circumvent consumer credit laws,” Miller said.
Brian Burdick, Indianapolis attorney at Brian and Thornburg LLC, represented the payday lending industry and said regulations would put payday lenders in Indiana out of business and encourage borrowers to go to lenders online. , which present more risks.
“It doesn’t decrease the demand for loans, so people just go into the unregulated market,” Burdick said.
Rep. Woody Burton, R-Greenwood, asked Burdick about the ultimate goal of lenders and how long they want to keep borrowers trying to repay their loans.
Burdick said the problem is that there is a subprime credit gap and the end goal of payday lenders is to lead borrowers down the path to bankability and creditworthiness.
The Study Committee will meet on September 4 in a joint meeting with the Interim Study Committee on Public Health, Behavioral Health and Social Services to hear testimony regarding the various factors contributing to the rising costs of health care.
Emily Ketterer is a reporter for TheStatehouseFile.com, a news site powered by journalism students at Franklin College.