Journal Gazette: Bill would tighten predatory lenders’ grip
Sunday, February 24, 2019 1:00 am
Bill would tighten predatory lenders' grip
It is time to call our legislators. Encourage them to oppose the expansion of predatory lending in Senate Bill 613, a bill that preys on the most vulnerable families in our communities.
For instance, despite the three jobs Steve and Tammy work, they struggle to cover the basic costs of living for themselves and their two children, living paycheck to paycheck, just getting by.
Then, their heater breaks. To cover the cost of the repair, they skip paying one of their regular monthly bills. At the end of the month, they'll sit down to determine which bills they can afford to pay and which ones they will have to let slide.
After several months of this, they decide to go to one of the payday lenders in their neighborhood. Steve and Tammy can get a short-term loan that will help them get back on their feet. What they don't realize is that by signing up for a short-term, high-interest loan, they are being thrown into shark-infested waters with an anchor wrapped around their neck.
Within a month, Steve and Tammy are forced to take out another short-term, high-interest loan to pay off the previous one. What Steve and Tammy didn't realize is the non-refundable up-front fees and interest rates average a whopping 365 annual percentage rate for payday loans. Soon they are another statistic of the predatory lending industry in Indiana. They end up taking out eight different payday loans and instead of owing $200, they now owe almost $2,000.
Lobbyists for the subprime lending industry are telling our legislators that by expanding the offerings of high-interest loans, they are providing a “ladder” to financial security for financially distressed Hoosiers. Senate Bill 613 promises Hoosiers perpetual debt. High interest rates, high fees and add-on insurance costs protect the lending companies and force borrowers into a cycle of debt.
Lobbyists testifying before Senate committees have misled state senators trying to make a good decision. Lobbyists are claiming their products are being used by average Hoosiers. But that's not the case. Payday lending storefronts are in our lowest-income neighborhoods, preying on the most vulnerable families in our communities.
Predatory-lender lobbyists are also misleading legislators when they say their products are used primarily for emergency expenses. Pew research shows 69 percent of loans are used for ongoing expenses such as rent and utilities. Of course, anyone not able to pay for their housing may consider it an emergency.
The high-interest, small-loan industry says it is providing a vital service to the community by providing its products, and without these product, people would have nowhere to go. The reality is that these loans only add to the burden of families. There are organizations in our community that can help families such as Tammy and Steve. Anyone in Indiana can be connected to the veterans, faith-based and human service agencies that will help a family out of a crisis by calling 211. These organizations help people address the root cause of financial problems.
In the end, payday borrowers such as Steve and Tammy usually turn to sources of help they could have tapped into in the first place – friends, family, church or social service agencies. Without payday lenders, borrowers would reach out to the other sources first, avoiding the debt spiral altogether.
Join us in the fight for working Hoosier families such as Steve and Tammy who are being exploited. Join us by reaching out to your state senator and representative and encouraging them to oppose the expansion of predatory lending in Senate Bill 613. Encourage your legislator to support Senate Bill 104, which caps lending at 36 APR, just as we federally mandate for our active military.
Our legislators need to hear from you. They need to know you care about Steve and Tammy and the families who are being manipulated by predatory lenders. Call or email your legislators today!