Bill to cap payday loans might die

Saturday, November 03, 2007

CONCORD – State Rep. David Smith, D-Nashua, vowed Thursday to fight a House working group that recommended death for his legislation to cap at 36 percent what payday and title lenders can charge for short-term consumer loans.

"I'm very disappointed in the subcommittee's vote,'' said Smith, a retired banker.

Loan company executives warned if Smith's bill (HB 267) became law, they would leave the state, as they did after Oregon adopted the same cap.

A majority on the House Commerce Committee endorsed an industry-pushed plan to limit payday loans to $15 on $100 for a two-week note, which is an annual interest rate of 360 percent.

Most on the subcommittee also embraced the title industry's offer to cap their loans at $22 per $100 a month or 264 percent annually.

Advance America charges consumers $20 per $100 in cash advanced, up to a maximum $500 loan in New Hampshire. A $100 loan plus the $20 finance charge borrowed for two weeks works out to a 521 percent annual interest rate.

A 36 percent rate cap is an effective repeal of our industry," said Jamie Fulmer, director of investor relations for Advance America, which recently opened a branch in Merrimack.

The working group will meet Oct. 30 to take formal votes on the alternatives to Smith's bills, which would also tighten state regulation and provide consumers with more protections.

All these measures will come to the full House of Representatives for a vote early in 2008.

The state repealed interest restrictions on payday and title loans in 2003. Several lenders set up multiple offices in New Hampshire soon after, serving as many as 30,000 borrowers a year who live here or come from neighboring states that have loan restrictions.

Rep. Steve DeStefano, D-Bow, said putting these companies out of business won't keep working class residents from needing cash in an emergency. The options left to them will range from pricier Internet loans to loan sharks.

Rep. Lee Quandt, R-Exeter, said despite consumer horror stories in other states, there has been little abuse in New Hampshire. But Rep. Stephen Spratt, D-Greenville, said the lenders thrive on a flawed business model that requires them to charge exorbitant rates.

"Where did the (borrowers) go before 2003?'' Spratt asked rhetorically. "These businesses just flocked in here when we gave them an opening.''

Banking Commissioner Peter Hildreth announced Wednesday that he supports the 36 percent cap Smith is pursuing.

Two major credit unions have announced they will offer their own short-term loans at much lower rates. St. Mary's Credit Union will offer loans at an annual rate of 18 percent. Service Credit Union of Portsmouth already is granting two-week loans that range up to 18 percent annually depending on the borrower's credit rating.

Both credit unions require a $5 charge to become a member and also carry an application fee.

Source: http://www.nashuatelegraph.com/apps/pbcs.dll/article?AID=/20071019/NEWS01/310190074/-
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