TALLAHASSEE — Nearly 17 years after the Legislature passed tough rules governing payday loans, a bipartisan push to loosen some of those regulations has emerged that would push annualized interest rates over 200 percent.
Critics say the move will plunge poor people who become dependent on short-term loans even deeper into a ‘cycle of debt’.
Such loans are “appealing” to low-income workers facing unexpected expenses or who don’t have access to traditional banks and financing options, says Alice Vickers, an attorney for the Florida Alliance for Consumer Protection, a group of consumer protection.
“Consumers roll over these loans over and over again and end up paying a lot more for these loans than the original principal amount they received,” Vickers told a House panel on Wednesday. “More [payday] Florida State borrowers take out more than seven loans a year. This is no way to manage your financial budget within a family.
Bills in the House and Senate would raise the cap on payday loans from $500 to $1,000 and allow lenders to provide loans for 60 to 90 days. The current law allows only 7 to 31 days for such loans. The bills would also allow interest rates of 8% every two weeks.
As of June 30, there were 936 payday loan stores in Florida that had issued 7.7 million loans in the previous 12 months, according to state data. These loans totaled $3.06 billion, with lenders able to collect $306 million in fees.
Lobbyists for Amscot and Advance America, the two largest payday lenders in Florida, note that only 1.8% of loans in Florida are in default. They say the bill is needed to comply with new federal rules released by the Consumer Finance Protection Bureau in October. The rules encourage longer-term loans to give borrowers more time to repay and require lenders to ensure borrowers can afford to repay the loan.
“It sets up unreasonable repayment capacity for our consumers, so most of them would be blocked from accessing that credit,” said Carol Stewart, lobbyist for Advance America.
But the agency’s rules were crafted and published by Obama-era officials, and Mick Mulvaney, the new Trump-appointed head of the CFPB, said this week that the new rules were being reviewed, indicating that the Trump administration could reverse or cancel them.
Amscot wields considerable influence on Capitol Hill and has donated $1.39 million to influential lawmakers and committees from both parties over the past 18 years. Since 2000, Amscot has given the Republican Party of Florida $797,700 and the Democratic Party of Florida $293,000. He has given Governor Rick Scott’s political committee $200,000 since 2012.
The Tampa-based company has also hired former Democratic lawmakers such as former U.S. Representative Kendrick Meek of Miami and former Florida Representative Joe Gibbons of Hallandale Beach as lobbyists.
“A large number of [payday borrowers] avoid bad credit because they can take advantage of this product to be able to pay their rent, to be able to pay for other things that could be a financial emergency,” Meek said.
In 2001, the legislature passed sweeping reforms limiting the amount of payday loans and creating a database to record loans to prevent borrowers from accumulating multiple loans and debts at once. The law also provides for a 24-hour waiting period before borrowers can obtain another loan and grants borrowers who request it a 60-day grace period and financial counseling.
The reforms were passed after a series of Orlando Sentinel Editorials, Pulitzer Prize Winners detailing the 264% annualized interest rates that payday lenders could charge at the time.
But this week Lawmakers on both sides have said the law change is still needed and that payday loans, while not ideal, are the only option for people living paycheck to paycheck. needing money fast.
Republicans said they were simply letting lenders come up with a new product.
“Do I think there are people who are trapped in debt? Yes,” said Rep. Jamie Grant, R-Tampa, sponsor of the House bill. “Do I think access to products in the market is the reason? Nope.”
Democrats warned that the working poor could turn to street loan sharks if payday loans were unavailable, and said payday borrowers weren’t ignoring expensive interest rates.
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Rep. Janet Cruz, D-Tampa, told the story of her mother using a payday loan as a child to fix a broken refrigerator.
“She knew what she was getting into,” Cruz said. “Being poor or in financial difficulty doesn’t mean you’re stupid.”
Cruz, the House Democratic leader, and Senator Oscar Braynon, the Senate Democratic leader, are co-sponsors of the legislation.
The House version of the bill, HB 857adopted on Wednesday in committee unanimously and the senatorial version, SB 920walked through its first committee hurdle Tuesday with two tie votes, from Sen. Rene Garcia, R-Miami, and Sen. Annette Taddeo, D-Miami.
However, other groups like the NAACP and AARP have voiced their opposition to the bill. Nearly 26% of payday borrowers are 60 or older, with many living on fixed incomes, making it difficult to repay loans, said AARP lobbyist Dorene Barker.
“The [debt] cycle still exists today for too many Floridians,” Barker said.
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