Gov. John Bel Edwards on Tuesday vetoed a law that would have allowed Louisiana payday lenders to offer installment loans worth up to $1,500, with fees and interest totaling 100% of the principal lent.
The godfather of Senate Bill 381says Sen. Rick Ward, a Republican from Port Allen, argued that the new loan product would help paycheck-living Louisiana residents make ends meet when faced with surprisingly large expenses.
But critics called it a predatory product and said allowing payday lenders to make larger, longer-term loans would trap low-income Louisiana residents in cycles of debt.
Edwards agreed, written in a veto message on tuesday that “despite the best efforts of the sponsor of the bill, I do not believe that this bill adequately protects the public against predatory lending practices”.
Is a $1,500 loan worth it if it costs you $1,500 more in interest and fees?
“I have long been opposed to payday loan products that are designed to keep vulnerable people in debt, often paying exponentially higher interest rates than would otherwise be available at commercial banks,” he said. he continued.
The state’s current payday loan system allows lenders to offer a loan of up to $350, due on the borrower’s next payday. The maximum a payday lender can make per loan is $55.
Senate Bill 381 does not replace or reform this system. Instead, it creates a new product, with monthly payments over a period of three to 12 months.
Lenders offering the new product described in SB381 would make most of their money from a monthly “maintenance fee” worth up to 13% of the original loan amount.
For a loan of $1,500, these costs would amount to $195 per month.
“While I am willing to support and sign a bill that reforms payday loans in a way that provides appropriate safeguards on interest rates and fees, this bill unfortunately falls short of that standard. “wrote the governor.
Public Service Commissioner Foster Campbell, the state’s second-longest-serving civil servant and an early supporter of Governor John Bel Edward…