Bill to Fix Payday Lending Glitch Rejected by Lawmakers

A Hinds County Democrat, Representative Adrienne Wooten, led an unsuccessful bid, once again, to repair a glitch in a payday lending law in Mississippi. This law was slated to give borrowers a longer repayment term of 30 days to repay loans that exceeded $250. As it now stands, borrowers have two weeks to repay loans before new fees are added, instead of the proposed 30 days.

As part of a provision made to Mississippi’s 2012 Check Cash Cashing Act, two tiers of loans were put into place. The first tier applied to loans that were for $250 or less, and gave borrowers a two week repayment term. The second tier was for loans with combined fees that do not exceed $500. These types of loans were supposed to feature a 30 day repayment period.broken-piggy-bank-loose-change-mdn

To get around this law, some short term lenders issued two or more loans with two week repayment terms, with each loan charging fees of between $23 and $100. This allows lenders to take in as much money from a two week loan that totals more than $400 than for a single loan for the same amount.

When the 2012 Check Cash Cashing Act was created, an act that gave permanent authorization to payday lending in Mississippi, state legislators put a cap on loans that range from $400 to $500. The exchange for this allowance was that borrowers were going to get 30 days to repay their loans that exceeded $250.

No one is sure if the loophole was created intentionally, but it ensured that lenders would not make loans for more than two weeks at a time. Some lenders complained that the 30 day loan repayment terms would severely limit their cash flow, forcing lenders to limit loans or to even shut down their businesses in some cases.

Representative Wooten expressed that she expected the payday lending loophole to get stopped by the House Banking Committee, as it has for the previous three years. Wooten said, “It’s not going to come out,” referring to House Bill 790 a few days before the deadline for bills to get out of committee. “It’s not something the majority wants to take place.”

If the bill had been successful, it would have limited payday lending companies into issuing borrowers a single check for all loans that exceeded $100.

A Banking Committee Chairman, Hank Zuber III, along with his colleague at the Senate, Gary Jackson, stated in official interviews that the payday lending glitch should be fixed. However, neither of these gentlemen took action to get it resolved. They said that they were going to wait to see what the CFPB announces as its official rules for payday lending. By way of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, payday lending is subject to the CFPB.

Jackson expects that the CFPB will, as he said on record, “… take a fairly strong stance in the future.” Jackson predicted that this type of official action would come back in November, but it has not happened so far. Zuber clarified his stance by saying that he would wait “to see what they do.”

Zuber had discussed the fix for the check cashing law with Chairman Jackson, and even considered introducing a bill that is similar to HB 790. He did not comment on whether or not he would actually back HB 790.

Experts do anticipate that payday loans will be subject to new restrictions very soon, but completely banning these types of loans is not likely at all. Payday loans, as much as some people do not like them, are often the only option that lower income people have when they need to access fast money to pay bills or take care of other expenses.

Luann Abel posted at 2015-3-4 Category: Payday Advance