INDIANAPOLIS, Ind. — The Indiana Senate is poised to vote on a measure Tuesday that would allow payday and subprime lenders to charge interest rates on small loans at levels currently classified as felony loan sharking.
The payday loan industry has pushed for similar legislation for the past three years, only to be rebuffed amid concerns from social service organizations and others who see such high-interest rates as predatory.
But this year’s legislation is getting some high-powered lobbying assistance from another group: subprime loan companies that specialize in installment loans with interest rates of nearly 100 percent.
That’s far exceeds the 72 percent rate that Indiana law currently defines as felony loan sharking. Payday lenders can offer higher rates but only for smaller loans with shorter terms.
Installment loan companies have faced scrutiny in other states for high-pressure loan renewal tactics and aggressive collection efforts. They are currently limited in terms of what products they can offer in Indiana. As a result, many don’t operate here.
Senate Bill 613 could change that. Two new types of loans allowed under the bill are garnering the most controversy.
- Loans of $605 to $1,500 for six to 12 months with annual percentage rates as high as 192 percent. These loans would be offered by payday lenders such as Advance America and Check Into Cash.
- Installment loans of up to $4,000 with negotiable repayment periods of up to four years and rates of up to 99 percent. These loans would be offered by installment loan companies such as Security Finance and Eagle Finance.
Those proposals were introduced Thursday in a eleventh-hour 69-page amendment in the Senate Committee on Commerce and Technology. The committee voted in favor, along party lines.