INDIANAPOLIS – Predatory lending; debt traps; criminal loan sharking.

These are just a few phrases used to describe a subprime lending bill moving through the legislature against the wishes of a broad coalition of faith and social service groups.

“The loans allowed in this bill would throw gasoline on the fire,” said Tanya Bell, president of Indiana Black Expo.

“Making loan sharking legal under the guise of offering help is absurd. Senate Bill 613 helps no one but the out-of-state lenders who have come to our Statehouse armed with a deceptive sales pitch.”

The bill barely passed the Senate – 26-23 – and now the House is considering the measure. It's clear there will be changes if it moves forward.

“It doesn't give you a warm and fuzzy feeling to carry the bill, but it's needed,” said Rep. Matt Lehman, R-Berne. “There is nothing between payday lending and a traditional loan. The market is already there. Shouldn't we create something with regulatory boundaries? They are necessary products.”

This year's skirmish is the latest in a multiyear attempt by the lending industry to expand options for those with lower credit scores or none at all.

Right now, state law caps annual percentage rates for loans at 72 percent. Anything above that is considered felony loan sharking. The only exception is payday lending, which allows a very specific two-week loan for up to $605 – at APRs up to 391 percent.

APR covers not only interest but other related fees, such as origination and late fees.

Senate Bill 613 would authorize several new lending products for Hoosiers who can't obtain traditional loans. The new products would have lower rates than payday loans at 391 percent but would last longer and allow higher amounts to be borrowed.
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