INDIANAPOLIS — A bill that would allow payday lenders to charge fees three times the existing felony loansharking rates passed the Indiana General Assembly and was forwarded to the state Senate this week.
State law requires that loans not exceed interest rates of 72 percent per year. But by offering short-term loans, typically about two weeks long, payday lenders circumvent the annual rate restrictions. According to research by the Indiana Institute for Working Families, the average payday loan’s Annual Percentage Rate (APR) exceeds 300 percent.
The payday lending bill that passed 53 to 41 in the state House on Wednesday would create a new tier of payday loans, lasting longer than the traditional two weeks.
If it passes muster in the Senate, the new “unsecured consumer installment loan” could have Annual Percentage Rates (APRs) up to 222 percent. The loans’ terms would be between three and 12 months, and could be taken out on principals of $605 to $1,500. For example, on a three-month loan of $605, a consumer would be charged up to $144 in monthly maintenance fees and $91 in a nonrefundable original fee, adding up to a total payment of $840.
Democrat and District 6 Rep. Pat Bauer, who voted against the bill, said it would expand “usurious” lending practices and added that its passage in the state House is evidence of the sway lobbyists hold in Indianapolis. He said former Republican lawmakers Matt Bell and Matt Whetstone have been the primary lobbyists for the payday lending industry.
“They hired two lobbyists who were former close colleagues of the speaker. They certainly hired them for a reason,” Bauer said. “It’s a shameful example of what money can buy. It’s a shameful example that people’s lives are going to be destroyed further because of this.”
Bauer lamented that if passed into law, the payday lending industry could expand in the state. He called the passage in the House “unconscionable” and “a ruse.”