The Payday loan bill, House Bill 1709, is one of those bills that ping-ponged back and forth between the House and Senate over the past week or so. I lost track of which version was winning, but Rep. Steve Kirby, D-Tacoma, said the final version is the one that came out of his committee.
For those of your following the bill, you know what that means. The rest of us will just have to look up the bill.
Here’s the prime sponsor’s take on things, from the desk of Rep. Sharon Nelson, D-Maury Island.
Payday loan law heads to governor’s desk
Nelson: New law means small loans don’t snowball into endless debt
OLYMPIA — A ground-breaking reform by Rep. Sharon Nelson, D-Maury Island, would give basic protection to people who take out payday loans.
“Too many working families get dug into a financial hole from which they can never escape,” said Nelson, a former banker and author of House Bill 1709. “This law will help prevent a single payday loan from ballooning into crippling debt.”
The Senate passed the bill 26-23 on Wednesday night. Now the bill heads to the governor’s desk to be signed into law.
“The idea is simple,” Nelson said. “Would you take out a second full mortgage because you fell behind on your house payments? Nobody would suggest that. But it’s standard practice in payday lending. If you can’t repay the loan on time, they give you another full loan, then another, and another. College students who only meant to borrow $400 to fix their car can wind up with a loan for $800 they can never repay.”
The Fair Loan Act of 2009 is meant to give working people a fair deal on payday loans. The new law would reform the structure of these loans. Instead of a maximum of 45 days to repay a loan, which leads to taking new loans to pay off earlier ones, the minimum payoff date would be 60 days.
“Some lawmakers want to abolish payday loans entirely,” Nelson said. “We’re not pushing for that. There’s a place for payday lending. It can be a quick way to get a small loan that your bank wouldn’t do. The only thing we’re trying to do is make things fair, so these tiny loans don’t transform into financial nightmares.”
Almost 90 percent of payday loans go to people with five or more loans a year, Nelson said.
“The growth of payday lending is a big reason why citizens in Washington have one of the highest debt rates in the nation,” Nelson said. “With more families hurting and out of work, it’s time to tackle this problem.”
Rep. Tina Orwall, D-Normandy Park, said she co-sponsored the bill because it offers common-sense solutions to this problem.
“Under this law, instead of being forced to take out a new loan to pay off the old one, you’d get a payment plan,” Orwall said. “You’d get a chance to pay off your debt instead of having your debt doubled and doubled until your finances collapse.
The federal government knows the damage payday loans can cause. That’s why they capped the interest charged to GIs and their spouses to 36 percent a year. I believe it’s unreasonable that ordinary citizens can still be charged up to 2,700 percent a year.”