OLYMPIA (AP) — A Washington state House committee heard testimony Wednesday on a bill to allow a new type of low-dollar, high-interest loan pushed by the payday lending industry.
The measure heard Wednesday in the House Business and Financial Services Committee would allow for loans of up to $1,500 that must be paid off within a year. A borrower paying off such a loan on time would pay slightly more than 100 percent of the principal in interest and fees.
Rep. Steve Kirby, the committee chairman and a bill supporter, said it would help those in a financial jam get access to cash that doesn’t have to be repaid as quickly as a payday loan.
The Senate passed a version of the bill last month, but the version before Kirby’s committee includes more consumer protections. Among those are reducing the length of the loans from 18 to 12 months, limiting the number of loans one person can take out to 12 per year, and barring members of the military from being eligible for them.
The interest rate and fees are unchanged from those in the Senate version, however. They include 36 percent annual interest, a monthly fee of 7.5 percent of the full loan amount that is capped at $90 dollars per month, and an upfront fee of 15 percent of the loan, up to half of which is refundable if it is repaid early.
Bill opponents say the new loans would amount to an end-run around a 2009 state law that reined in payday lending practices. Under that law, payday lenders can only lend up to $700 at a time, and the loans must be repaid within 45 days.
Supporters say the loans are a better short-term deal for borrowers than payday loans.