Last week, when H810 (Consumer Finance Act Amendments) finally got its day in committee, things didn’t go the way industry planned. They were confident that they had the votes to get this out of committee and on to the floor. They were unprepared for what was to take place. Several military officials were in the building to oppose this bill as being bad for military families. In what I believe is the highest ranking military official to make a presence in the General Assembly, Col. Stephen Sicinski, garrison commander at Fort Bragg, made his presence felt. He clearly articulated the military opposition to this bill and his presence, I believe, delayed a vote on the bill. I don’t think that any member of the house banking committee who supports the bill wanted to be seen voting for the bill in his presence.
That day in committee the industry offered a shorter substitute bill that took out the provision to raise rates. Instead, they are now asking to increase the maximum loan amount to $15,ooo from its current $10,ooo limit. They also want to increase the loan level brackets that rates apply too. For example , currently you can charge up to 36% on the first $600, they want to increase that to the first $1,500. Subsequently, all the brackets after that will increase as well. They also want to increase the max fee for loans up to $2,000 to $100 and add a handling fee of $3 per month for every $100 that is borrowed. All this seems like cost increases to me, even though the industry in their presentation hammered home the point that interest rates stay the same. While that is true, the rates would now apply to a broader dollar amount making the loan more costly. When you add in the fee hike and the new handling fee the true cost of the loan has grown significantly.
The industry likes to talk about how this increase is needed because loans from $0 – $1,000 have decreased, because they are not profitable. What they don’t like to mention is that loans between $1,000 and $3,000 have increased, because they like to up sell their clients. That lines up with their desire to increase brackets for which interest rates apply. The industry is trying to pull one over, but the military sees through it.
After the meeting, Col. Stephen Sicinski, was asked if he was being unfair to describe these installment loans as payday loans. He admitted that probably was unfair since these are installment and not tied to a paycheck. However, he was right with his next point, which was while that may be an unfair comparison the bottom line is that they are all predatory.
Here is some of the press around the state on this issue: