The bill is headed for a full hearing.
"We will be there for the testimony on this bill," said
Typically, payday loans offer the borrower two weeks of credit, with payment in full due on the borrower's next payday at annual interest rates sometimes reaching 400 percent. Often the borrower is indebted for months struggling to repay the loan.
Proponents say that payday loans are a useful tool for consumers who lack access to conventional banking services. Others say they overburden people who are already struggling to pay their bills.
The bill, S1314, introduced by state Sen.
Heider did not respond Wednesday to
Bourke said payday loans are "fundamentally unaffordable" and "the draft bill does not address that."
Ways to make the loans more affordable should include capping the interest rates.
"It would also take away credit from people that don't have the means to get it elsewhere," she said.
Bourke said if a state chooses too low of an interest cap, it can put lenders out of business. But if the state chooses a cap wisely, there will still be access to these types of loans for consumers, just fewer lenders who have to play by the new rules, Bourke said.
"While 45 percent interest seems high, right now their rates are unregulated," said Sterling.
Predatory or Nondiscriminatory?
Paoli said payday-type loans were designed as an option for some people to meet unexpected expenses without writing a bad check.
Using annualized percentage rates to evaluate these types of loans is misleading, she said. Short-term loans should be compared to the real-world alternatives such as insufficient funds check fees and the credit damage associated with such alternatives.
"Some people say we're preying on Hispanic people and the poor. But, we don't want to be discriminatory to our customers either. Everyone is welcome here," said Paoli.
She said her office has Spanish-speaking employees to make sure everyone understands the terms of the loans and the company works with customers who default on their loans.
"Everyone is entitled to credit not just a select few who can afford it," Paoli said.
A Focus on City Laws
Sterling said Heider's bill follows the payday lending industry's best practices.
"It's nothing more than that and it undermines any type of solid reform," Sterling said.
"Many city leaders recognize that the triple-digit interest rates are detrimental to our communities," said Sterling.
Sterling understands the payday lending issue first-hand as a former college student and mother who was lured into the debt trap.
"I've been that person," Sterling said.
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