Lawmakers Consider Payday and Title Loan Reforms

Excepting New Hampshire, Payday and high-interest car title loans are barred in every northeastern state save Rhode Island. They've only been in available locally since 1999, when lawmakers rolled back the 24 percent interest cap that had been in place since the colonial era…….Since then, though, payday and title lending have made up for lost time……..Including the 4 loan offices licensed since the turn of the year, the state now has more than 90 loan outlets…..Last year licensees extended customers more than 60 million dollars in credit……While the industry says such growth shows customers want what they provide, critics claim the state's burgeoning small-loan market is taking what should be short-term problems and makes them linger.

"The payday loan industry is kind of like the crack cocaine of lenders. You're desperate for money and it feels pretty good when you get it, but the long-run effects -- and they aren’t too long run -- are very very destructive."

That's Gordon Allen economist with Citizens Alliance of NH, and advocate for the mentally ill and disabled……He and most other industry critics say payday lenders are engaged in an a legal, but unethical, practice that preys upon the vulnerable.…….At the hearing, those critics ranged from credit councilors to legal assistance attorneys, to welfare directors from the cities of Keene and Manchester….Their view, however, did not go unchallenged. Economist Brian Gotlob pointed to an industry funded study that looked at borrowers of a local title loan company…..Gotlob assured the committee that his work had no slant, but did concede that his study was confined to a 600 borrowers that had been pre-selected by the company. Gotlob said the bottom line shows that people in NH who use these loans span the classes and include more than a few high earners.

"Dentists, radiologists -- while I don’t mean to suggest that they are the bulk of borrowers, it is clear that this industry cuts across the income, occupational and even the educational spectrum."

That gloss on borrowers, wasn't exactly born out by the only self-identified payday load customer who showed up to testify….

"I am on social security disability."
That's Megan Tracy of Concord.. In addition to social security, the 42-year old also receives aid to the permanently and totally disabled……..Her monthly income is about 700 dollars……Tracy says she relies on regular payday advances, and always pays them on time…..She says without them, she doesn’t know what she'll do.

"If they leave than that's one source of income, so to speak, that I'm not going to have access to any more. And it's easy to sit there and say you can borrow it from friends or family or go to a credit union. What if I don't want to join a credit union? That's not fair to me."

And whether there needs to be viable alternatives for those who took out the approximately 160,000 payday and title loans issued in the state last year is an open question…Donald Tucker, a one-time Florida Speaker of the House, testified on behalf of Community loans of America, which operates 650 loan outlets nationwide, including 4 in NH……Tucker told the committee he was had never been so impugned in his life as when critics called his industry immoral………He proved similarly frank when it came to getting across the his view on what would happen without regulated small lenders who are willing to look past a spotty credit history.

"There's probably a guy named Guido on the corner which they go to get their loans and they put up their knees as security."

New Hampshire's top banking official, meanwhile, says the state ought to do better by those who need small loans…….Banking Commissioner Peter Hildreth notes that some credit unions are starting to offer small unsecured loans lines with interest rates as low as 16 percent…..He says he hopes that trend continues……..Hildreth adds though that he's become convinced the first step towards any long-term solution is simple: get rid of payday lending.

"It's not an easy issue. And my position up until now had been there's a need for them, and if you're going to do something you've got to find the solution. I no longer think that's going to happen as long as they are here."

The payday loan measure has been sent to a subcommittee……It will return for a full committee vote in the coming weeks.