Montana Payday Loan Bill Placed Before Lawmakers
Lawmakers heard testimony yesterday on a bill that would radically change the instant payday loan and title loan industries in Montana.
The measure, sponsored by Rep. John Parker, D-Great Falls, at the request of the Department of Justice, would cap the interest rates on such loans at 36 percent, reports The Billings Gazette. It would also cap loans at 25 percent of the borrower’s net income or $300, whichever is less.
Attorney General Mike McGrath said interest rates on some faxless payday loans were as high as 650 percent, forcing some people to borrow more money to pay for their original loan, a situation he called a ”debt trap.”
”And sometimes you can never get out,” McGrath told the House Business and Labor Committee.
Committee members took no immediate action on the bill.
Shawn White Wolf, 34, said he’s paid more than $2,000 in interest on a $400 title loan in the past year. The Helena resident told the committee the businesses that offer title loans are preying on poor people.
”I hope you remember that the poor people, they need protecting, because they are the ones who are affected by this,” he said.
But former lawmaker Jeff Mangan, who wrote similar legislation on short-term loans in 2001, said the right laws were already on the books and the new bill would go too far.
”What this law is trying to do is regulate consumers,” Mangan said.
The bill includes provisions for a database to monitor borrowers with outstanding balances to prohibit them from taking out additional payday cash advances.
Todd Coutts, who owns a loan center in Missoula and co-owns one in Helena, said the new bill would wipe out most of the short-term loan industry.
”I know if this legislation passes it is going to pull the rug out from underneath me,” he said.
But McGrath said the new fast cash advance law would only affect those businesses that are taking advantage of their consumers.
”I think there is room for this business to survive, 36 percent is a very good rate,” he said. ”The good business people…will do quite well.”