Tacoma Democratic Rep. Steve Kirby says he will be proposing some “significant changes” to a payday lender-backed proposal making its way through the House. He said the end result would be a loan product that could replace payday loans.
Senate Bill 5312 would allow lenders to make a new type of high-interest unsecured loan – sort of like a payday loan with an installment plan. Kirby said the changes he will be pushing for would make the bill more consumer-friendly.
Opponents of the bill, like Sen. Sharon Nelson, D-Maury Island, said the proposed changes are being used to “peddle a loan product that lets predatory lenders like Moneytree circumvent the 2009 payday loan reforms.” Nelson called the plan “payday loans on steroids”.
Kirby provided The News Tribune an advance look at some of the changes he plans to offer, but stressed the changes weren’t official yet. He said he hopes to get the formal wording complete before the Mar. 28 public hearing in front of the House Committee on Business & Financial Services. Kirby is the committee’s chair.
Here’s a list of the changes Kirby said he wants:
Shorter loans: The Senate version of the bill allows for 6-18 month loans. Kirby said he wants to see the loans capped at 12 months.
Partial origination fee rebate: Kirby said he wants lenders to rebate up to half of the loan’s 15 percent origination fee if the loan is paid off early. The Senate version of the bill has no such rebate provision.
Capped monthly maintenance fee: The Senate version of the bill allows a monthly service fee of $7.50 per $100 borrowed; which on a $1500 loan would be $112.50. Kirby said he wants the fee capped at $90. Additionally, Kirby said the maintenance fee wouldn’t be charged if the loan were paid in less than 30 days.
Capped delinquent payment penalty: Kirby said he wants the penalty capped at $25, and only one penalty could be charged per loan. The Senate version of the bill allows a penalty of up to 10 percent of the missed payment.
Loan limits: Kirby said he wants the loans tracked using the same database the state uses to track payday loans. He said borrowers would be limited to 12 loans per year, and could only have one outstanding loan at a time. The Senate version of the bill has no such cap.
Repayment plan: Kirby said he wants lenders to offer a repayment plan if a borrower defaults on a loan.
Restrictions on military: Kirby said he plans to propose language restricting military members from taking out the new loan. The Senate version has no such restriction. Kirby said the Department of Defense (DOD) has expressed concerns over the bill. DOD restrictions enacted in 2007 prohibit lenders from making certain types of high-interest short-term loans to military personnel.
Financial literacy fee: Kirby said he wants lenders to pay a $1 fee for each loan they make. He said the money would be directed to a financial literacy program run by the Department of Financial Institutions.
Early payment disclosure: Kirby said he wants lenders to disclose to borrowers the option of paying off the loan early.
Before coming to the House, Senate Bill 5312 passed the Senate with a 30-18 vote. Sen. Steve Hobbs, D-Lake Stevens, is the bill’s prime sponsor.