UPDATED: Payday lending hearing this morning in House

Rep. Sherry Appleton just got up to testify on nine separate bills to regulate payday lenders.

Payday loans are small, short-term loans issued for a fee — not a standard interest rate. For a $100 loan, for example, you might pay a $15 fee and the loan would be due at your next pay date — typically two weeks.

Appleton started her testimony by saying that she wasn’t feeling well, but had to come in: She said she’d been waiting so long for a hearing on regulating payday lenders.

Her reason: Between the loan fee and the short term of the loan, the APR comes out to between 300 and 1,400 percent, she said.

Watch the hearing live on TVW or at tvw.org. Check back here (and click through below) for updated information throughout the hearing. Check back here (and click through below) for updated information throughout the hearing.

The hearing room is full and an overflow room is available.

Here are the bills:
HB 1310
HB 1425
HB 1684
HB 1685
HB 1709

HB 1806
HB 1807
HB 1851

Rep. Steve Kirby, prime sponsor of five of the nine bills, is testifying now. He said he’s lucky to have a debit card and, when he makes larger purchases, his credit card.

“This is referred to as a ‘rich man’s payday loan,’” he said, of credit cards. He uses it, then pays the balance in 30 days.

“Sometimes a payday loan is their only available choice and for a number of people it actually works for them,” Kirby said.

The problem, he said, is when people “roll over” loans, or get more loans to pay for the original loan that they couldn’t afford. The bills “will also make it harder for an individual to get into trouble using this product and easier to get out.”

His bills include: HB 1310 would limit the type and frequency of collection calls. Currently, payday lending collection calls aren’t regulated, Kirby said. HB 1684 would limit the amount of the loan to no more than 1/3 of the borrower’s monthly income, HB 1685 would add a 60 day payment plan to the loans, 1806 would limit the amount a lender could loan to a borrower to $700 a month, 1806 would limit fees to borrowers with more than $700 of loans in 30 days, and 1685 would allow borrowers to opt into a payment plan for their loans once per year.

“These bills will make a significant difference to a great number of consumers,” he said.

James Brusselback with the Department of Financial Institutions, on 1310: He said one case of collection calls involved a payday lending employee claiming to be “Sergeant Stevens” when he called. Another caller from the same company threatened to take the borrower’s children away.

One woman, whose name I’ll update later, said it began with one $300 loan. She borrowed from two lenders — she says she paid $2,694 in fees to one lender over two years to avoid homelessness.

One note: These updates are in order of the testimony given. Please keep checking back to get different perspectives on these bills.

Lori Tucker, a credit counselor (whose name spelling I will correct when I confirm), says: “Lenders say they have guidelines against duplicating loans to individuals, but they will loan to a husband and a wife on the same day with checks from the same account,” she said. She said in certain circumstances, a one-time payday loan could be helpful to those who are “unbankable” — but, she said, in many cases they end up making people less “bankable” than they began.

Ralph Munro, former Washington Secretary of State, is now testifying: He said he wishes the state would completely outlaw payday lending. “This is a group that needs protection,” he said, “frankly, I don’t have any nice words to say about them, so I won’t say anything. I think it’s awful.”

Dennis Basford, owner of MoneyTree payday lenders, is testifying: “The highly regulated payday loan product we offer is transparent. There are no hidden fees, no changes in the terms and no effect on your credit score… we are regulated by a variety of state and federal agencies … Three bills in the committee today would eliminate these choices,” he said, which could drive people to getting loans from Internet payday lenders. “Customers will lose a regulated choice and employees will lose their jobs.” He said when Oregon passed less stringent laws two years ago, he closed his stores immediately. “I’ll say it once again, consumers will be forced to find more costly credit and they will be faced to seek unregulated providers who do nothing for our state’s tax base.”

Basford says he supports HB 1310 “wholeheartedly.” He said practices that the committee had heard — knocking on doors, showing up at work — aren’t ones his company engages in.

Another payday lender (name updated soon), said that according to a DFI report, the average payday lender makes 400 loans per month, for a total fee amount of $22,000. After rent, salaries and other expenses, that leaves $1,500 profit. Decreasing the APR, he said, would not be profitable. “If it was, I’d already be doing it.”

Kevin McCarthy, who has owned and operated Check Masters for the last 20 years, said many of these bills would shut him down. “Last year, our profit margin was a little under 7 percent — 6.8 to be exact,” he said. Lowering the fees would mean they’d be operating on 80 to 90 percent less.

Basford told the panel that payday lending business has dropped recently, contrary to popular belief. To get a payday loan, he said, you need a job — when unemployment rates go up, their customer base decreases.

Former state Representative Dawn Mason: “I became involved in this whole issue about three years ago,” she said. “There’s extremes that we’ve heard about. The alcoholic who borrowed money and blamed the industry for the alcoholism. We’ve heard from individuals who took out several loans, most likely (without the intention) of paying them back, therefore making them a predatory borrower.” She said some people “have to use these services.” She said she sent her son to a payday lender “because he will pay them back, he won’t pay me.”

I keep missing names!! The testimony has sped up because the committee has one minute left.

The last woman who testified said she was in a bad relationship and needed money to get out and put a deposit on an apartment. She got a payday loan and paid it back in two weeks as soon as she was paid. “My story may not make headlines,” she said, but she said she’s an example of a responsible use. “I make responsible choices and I don’t want a choice taken away from me.”

Tags: payday lending