House to vote on payday bill

by Jerry Mitchell

House Banking Committee Chairman George Flaggs said the House will vote today on whether to adopt payday lending reform to lower Mississippi’s 572 percent equivalent interest rate.

The House and Senate conference committee agreed on compromise legislation last week. “I can’t write a perfect bill, but I think this bill is fair to both sides,” said Flaggs, D-Vicksburg. “I think it’s going to be a model.”
Opponents questioned the reform, however, saying Mississippi will still be charging some of the highest fees in the Southeast.

“Even with the proposed changes being discussed, the maximum fee on a payday loan will remain the highest among our surrounding states,” said Ed Sivak, director of the Mississippi Economic Policy Center.

“Even with a slightly longer repayment term than in other states, the bottom line is what comes out of people’s pockets,” Sivak said. In Mississippi, a borrower is going to pay more than $65 in fees to borrow $300. In Tennessee, a family will pay $30 to borrow the same amount.”

Under current law a person borrowing $100 for two weeks would pay a $21.95 fee, but the compromise bill lowers the fee to $20 – or a 521 percent annual interest rate.

Dan Robinson, who owns 28 payday stores in Mississippi, argues the amount Mississippians would pay for an upper-tier loan would be lower since people will have at least four weeks to pay back, rather than just two. On loans from $251 to $500, the interest rate in Mississippi would be 286 percent for the four-week period, under the compromise.

Jamie Fulmer, vice president of public affairs for Advance America, the largest payday lender in the nation, said it’s difficult to compare fee structures among states. “You have to look at the entire bill,” he said.

On a $250 loan, Florida and Tennessee each charge $30, South Carolina $37.90, Alabama $43.75, Kentucky $45.13, Mississippi $54.88, and Louisiana $55.

Under the compromise legislation, Robinson said Mississippi’s fee should be really be viewed as half of $54.88 – $27.44 – because of the two extra weeks allowed for repayment. That would make it lower than most other states in the Southeast, he said.

He estimated the proposed changes would reduce payday lenders’ revenue by 10 percent. “With that reduction, I don’t see anyone going out of business,” he said. “Under the circumstances, the legislation is a compromise from all sides.”

Some opponents, including church leaders, have argued payday lenders are “preying” on poor and unsuspecting people.

“If you’ve got a checkbook and a job, you’re not stupid,” Flaggs said. “I don’t buy the argument that they’re preying on folks.”

He said he didn’t want to put 3,100 employees working for payday lenders out of jobs, he said. “The only thing the governor said to me was, ‘Don’t put them out of business, and try to do something fair.’ ”

If the House and Senate vote in favor of the compromise bill and the governor signs the bill, the changes would begin Jan. 1, 2012.

Two changes, however, would take place immediately: giving a financial literacy brochure to each payday customer and voiding all loans Mississippians have made with unlicensed Internet lenders.

Jennifer Johnson, senior legislative counsel for the Center for Responsible Lending, said the compromise bill is “still worse than the current law in that it continues loans at more than 500 percent APR for another five years while raising the debt load under this scheme to $500.”

The compromise bill also fails to bar people from taking out multiple loans, she said. According to the Center for Responsible Lending, the average payday borrower takes out nine payday loans in a year.

“What’s to prevent the industry from doing a promotional ‘no fee’ on the first 14-day loan?” she asked. “Easy to lure borrowers into a shorter term.”

To comment on this story, call Jerry Mitchell at
(601) 961-7064.