A Senate Committee heard testimony on legislation today that would cap payday loan interest rates.
Supporters argue the cap is needed to protect borrowers living paycheck to paycheck from getting caught in a cycle of debt.
Opponents say the change would force the industry out of the state, leaving people with only more costly options.
New Hampshire Public Radio’s Dan Gorenstein reports that key Senators are asking what other short-term loan choices are available for consumers.
Of all the arguments payday cap opponents have used, the one that has caught politicians’ attention is there’s a chronic need for short-term loans.
In New Hampshire for every $100 a person borrows, a loan company charges a $20 dollar fee.
So if you borrow $500, for example, you owe $600 dollars.
As collateral, the borrower writes the company a check to be cashed on payday.
In each of the past two years, New Hampshire payday lenders have tendered about 150,000 loans, with many borrowers going back multiple times over 12 months.
No one seems to know how many New Hampshire residents take out payday loans a year.
But in a hearing in front of the Senate Commerce Committee, opponents, hammered home that payday loans is the best, and really, the only option out there.
Terri Roy is co-owner of Main Street Payday Advance.
13:52 the payday advance APR is 391%, the overdraft protection fee is 701%, the credit card late fee is 965%, the offshore internet payday advance is 652%, and the bounced check with a merchant fee is 1431%...it’s easy to understand why the payday loan product is preferred by the consumer.
Supporters told the committee that there are plenty of choices available....family, friends, neighbors, churches, negotiating with landlords, or maybe getting an advance from your employer.
But Roy says those options have been out there, and clearly some prefer the payday choice.
She provided Senators with a series of letters from her customers who were asked what they would do if they couldn’t take out payday loans.
18:24...bankruptcy, nothing...go without paying bills sometimes....not be able to pay bills...I don’t know...go to welfare....don’t know where to go...I have no option.....
:23 this is not the only option people have. It’s the easiest option probably that people have.
That’s Keene welfare office case worker Kelly Darling Snow.
She says she’s not convinced that people have some passionate love affair with payday lenders.
Darling Snow says what’s happened for some borrowers is that people have experienced some economic crisis- like a spike in rent.
And she says, now to preserve their lifestyle, they need money they don’t have.
3:26 what I would do instead of saying go to a payday lender and borrow your rent, I’d say, ‘hey, let’s take this and say what are you going to apply for?’ are you going to get on list for subsidized housing, we are going to fast track that if we can...it takes a little bit more time, but these folks have ot spend time doing their homework, doing these things, but isn’t that what we want?
Kent Carlson doesn’t want to figure out a new solution.
The car salesman says he’s taken out 3 or 4 loans.
He says if he couldn’t take out the money, there are weeks he couldn’t have paid his child support.
And that means no time with his son.
1:14 I hate to even think about it, but quite honestly I might have lost some time with my son...I wouldn’t have been able to afford my rent. I would have had to get into a situation where I talked with my landlord, food would have been a difficult thing. Working on commission, you can have a week that is wonderful and other weeks that aren’t so wonderful. And literally you are in a situation where you need money and you need it now.
Senator Jackie Cilley is one of the senators who is torn over the issue.
She understands why payday loans work for someone like Carlson.
At the same time, she agrees that government should step in if consumers are using a product that can be personally destructive.
Especially, if the people ultimately take out loans they can’t afford and wind up asking local or state welfare for help.
11:02 if the borrower understand what they are paying to take that short-term loan out...and if they are not then showing up on the doors of government to say, ‘bail me out now that I bought my child an IPOD,’ then I say the option ought to be there. If they show up on the steps of our welfare office and they are showing up in droves b/c of these kinds of buys, then I have a problem with it, b/c then it’s costing me and every other citizen in this state money.
Cilley admits it’s unlikely she’ll ever figure out how many people abuse payday loans and how many really benefit from them.
But she sighs, that’s the wonderful part of having the job.
For NHPR News I’m DG.
I believe what Ms. Darling Snow does not understand is that the people of New Hampshire have a LOT of personal pride and would RATHER handle their own business in their own way instead of asking their government or their communities to give them a hand out. Kent Carlson is a hero in my book and sets a great example for personal responsibility. That kid is lucky to have him for a father.
Sounds a lot like we’re suing the fireman for water damage and not the arsonist for the fire. Teh lenders provide emergency cash when it can’t be gotten elsewhere. People need to be taught accountability for their own finances, the lack of which is causing people to put themselves in these cycles.
I attended the Senate hearing. The opponents of the bill had no objective statistics or information supporting their position. They couldn’t even provide the number of complaints received. They claim payday loans are burdening welfare services, yet no information of the actual cost. There was only ONE person there who opposing payday who actually used the service. Interestingly enough, even he said he didn’t want them to go out of business. The room was full of employees scared of losing their jobs. I hope the Senators consider that when they vote. There has to be a better way of protecting people from themselves.