The House Committee on Business and Financial Services approved a bill backed by Seattle-based payday lender Moneytree today. The vote: 13-to-2.
Senate Bill 5312 would allow lenders to make loans of up to $1,500 with effective interest rates nearing 200 percent and repayment periods stretching from six months to a year.
Currently, payday lenders can lend up to $700. Those loans — which can have effective interest rates of up to 391 percent — must be repaid with one balloon payment on the borrower’s next payday.
The Business and Financial Services Committee Chair, Rep. Steve Kirby, R-Tacoma, said the amendments he pushed for eased concerns of some committee members.
One of the biggest changes prohibits the new loans from being issued to military members. The restriction was requested by military officials who expressed concerns that the new type of loan product would circumvent a 2007 Department of Defense directive.
During a hearing on the bill last week, consumer advocates voiced their opposition to the bill. Their general consensus: “If a bill is too dangerous for the military, why is it safe for Washingtonians?”
The proposal is sponsored by Sen. Steve Hobbs, D-Lake Stevens. Hobbs did not attend Tuesday’s hearing. However, one of the bill’s cosponsors, Sen. Dob Benton, R-Vancouver, was in attendance for the vote.
The bill now has two possible paths. First, it could proceed directly to the House Rules Committee. However, that option isn’t ideal according to Kirby. Instead, Kirby said he hopes the bill will go to an Appropriations subcommittee chaired by Rep. Zack Hudgins, D-Tukwila. Hudgins is also on the Business and Financial Services Committee and voted ‘yes” on the bill.
Kirby said he hopes the bill will go to Hudgin’s committee because “it still needs a little tweaking.”
Kirby said a last-minute amendment request drew his attention to language in the bill that would allow lenders to sell the debt to banks and credit unions. He said he was unaware of that provision in the bill and believes the language was “inadvertently included” when the bill was being drafted. He said some of the language from the bill was taken from other laws, including a somewhat-similar law in Colorado. He said he would support that language being removed, and said that will likely happen if the bill goes to the Appropriations Subcommittee on General Government.
He said that would also give him some time to ease concerns over the bill in the House so that a floor fight isn’t necessary.