Payday Loan Times

With just three weeks remaining in the legislative session, proposals to restrict the state's controversial payday loan industry have fizzled out for the second straight year. This isn't the only instance in the country when, legislators and lenders have clashed over cash advances.

A coalition of consumer groups, the military and legislators sought tight controls on payday lenders, which issue short-term cash advances at high interest rates.

However, their proposals faced stiff opposition from the lenders, and from some lawmakers who didn't see a compelling case for sweeping new restrictions. Of the 15 payday loan measures introduced in the House and Senate, legislators on both sides of the issue agree that NONE will pass.

Reaction to the payday loan decision

Senator Darlene Fairley advocates industry restrictions. She and others vowed to return with a new round of proposed regulations next year. Meanwhile, one Navy official said the military is considering the unusual step of making payday lenders officially off limits to servicemen and women.

The use of quick cash loan topic was brought up in a 2004 session, when 14 payday-related bills were introduced. The one measure that passed codified "best practices" protections for military personnel, such as deferring repayment for a soldier who has been sent to combat.

This year's legislative hearings again pitted the payday industry against an organization not accustomed to defeat: the U.S. Navy. The Department of Defense has made restricting the loans a top priority, and Rear Adm. William French, the Navy's Northwest commander, testified that payday lenders deliberately ensnare sailors in debt, hindering combat readiness.

The stalled bills include:

• A proposal to limit the loans' annualized percentage rate to 36 percent
• A measure requiring cash loan lenders to offer payment plans to customers who can't repay a single loan, thereby curbing rollover fees.

The response of payday advance lenders

In response to critics, payday lenders point out that Washington borrowers took out more than 3 million of the loans in 2004; and in 2005, consumers filed only 69 payday loan-related complaints with the state Department of Financial Institutions. Doesn't this prove that provide a needed service to consumers who need emergency cash?

Dennis Bassford, president and CEO of Seattle's Money Tree Inc. was unavailable for comment. In past interviews with the Puget Sound Business Journal, Bassford has stressed that Washington's payday lenders already face strict regulations. He has stated that a 36 percent interest-rate cap would drive the lenders out of business.

Legislators ultimately had little appetite for new regulations, with most of the proposals falling apart at the committee level. Rep. Steve Kirby (D-Tacoma) chairs the House Financial Institutions and Insurance Committee and said consumer groups didn't prove the loans harm consumers.

"These assertions don't hold up or have never been demonstrated to us," Kirby said. "I'm not going to pass legislation that runs businesses out of the state of Washington unless there's ample evidence I should do that."

Looking ahead, regulation advocates plan to revisit the issue next year, but said payday lenders' growing political presence makes for an uphill battle.

"They have more muscle than the Navy or nonprofits, because they can make campaign contributions," said Rep. Sherry Appleton (D-Poulsbo) who sponsored five payday-related bills.

The fate of payday loans in Washington remains a mystery, although the resources have received a stay of execution for at least one more year now.