INDIANAPOLIS, Ind. — For the first time, all four major veterans organizations in Indiana are standing together to battle a bill.
They’re joining hundreds of community leaders and organizations opposing payday loan expansion.
“They are right in front of everyone’s face, they’re on every street corner and they market aggressively to low-income families,” said Erin Macey, a policy analyst for the Institute for Working Families.
At last count, there were more payday loan locations in Indiana than the number of Starbucks and McDonald’s combined. And soon, those lenders could turn even bigger profits, loaning to people who need longer-term loans.
Yesterday a house committee pushed House Bill 1319 forward, which would mean a regression for the state according to Macey.
“Indiana would be an outlier in terms of the rates that they allow on installment lending,” said Macey.
HB 1319 would allow lenders to give larger, long-term loans with much higher interest rates.
APR, or annual percentage rate, is a broader measure of the cost of borrowing a loan and includes fees and other charges. The APR for payday loans is often much higher than the advertised interest rate people see when they walk in.
HB 1319 would raise the maximum for these new type of loans to 200 percent, more than double the current legal rate for small loans. Macey says that’s despite recent polling showing 88 percent of Hoosiers favor cutting the rate from 72 to 36 percent instead.
Some experts say most are aware that the practice proposed in HB 1319 would likely push more people into debt.
“We’re unfortunately thinking that we’re going to see another onset of foreclosures and bankruptcies,” said Prosperity Indiana’s Kathleen Lara.
Community Financial Services Association of America, the trade association representing the payday lending industry says that’s not their goal.
Jamie Fulmer, Senior Vice President of Advance America, Cash Advance Centers responded with a statement.
“HB 1319 will increase Hoosiers’ access to regulated small-dollar, longer-term credit, strengthening financial choice for hardworking families and helping to effectively address the credit gap for consumers in need of slightly larger loans with longer terms. This installment option–a distinct product from the current two-week offering–balances a responsible and innovative solution for consumers seeking to cover unexpected expenses alongside critical consumer protections and guardrails, including a payment-to-income test, a statewide loan database and a flexible payment structure.”
Consumer advocates though say the loans and accompanying larger fees will indeed bury people in more debt. They argue a maximum 36 percent interest rate, the same federally mandated limit for active duty military members, is needed to prevent such a dire outcome.
A different proposed Senate bill would provide that.
Veterans groups say that would help stop the cycle of debt.
“You can go on any military installation and go out any base gate and there will be a payday lender waiting on them right there,” said Lisa Wilken, Legislative Director for AMVets.
Wilken notes that veterans often get themselves into deeper trouble as the interest limit for servicemembers ends once they get home for good.
She acknowledged that state lawmakers have offered an amendment to protect veterans with a lower cap.
But Wilken says all four major veterans organizations are sticking to opposition, to fight once again for their community.
“The way we see that as citizen soldiers is why would we ask for a protection for ourselves, if we’re not willing to work for it for all citizens in Indiana,” said Wilken.
The bill as amended is set for a vote as early as Monday.