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Payday lending bill will be changed; how is the question

Payday lending bill will be changed; how is the question
State Rep. Woody Burton, R-Greenwood, leads a hearing of the House Financial Institutions Committee Tuesday, March 26, 2019. (TheStatehouseFile.com Photo/Dionte Coleman)

INDIANAPOLIS (Statehouse File) — There is zero chance the payday lending bill will advance in the form it passed the Senate, House Financial Institutions Chairman Woody Burton said after a lengthy hearing on the controversial bill.

But what will happen to Senate Bill 613 is unclear. Burton urged those who support the measure and opponents who want it dead to seek compromise. The result could be a substantially amended bill that still keeps some form of payday lending, a bill reduced to just a summer study committee of the issue, or no bill at all.

Burton, R-Greenwood, authored Indiana’s original payday lending law 15 years ago. He said he “wanted supervision over those people [payday lenders] instead of doing it in parking lots. Even though it was interest rates of 350, 400 percent, but it was for two weeks.”

Burton, who opened Tuesday’s committee hearing with an acknowledgment that “I’d say this bill is a little controversial,” said afterward that he wants to ensure there is an emergency loan product that has government oversight, “but I’m not interested in giving away the store, either.”

“I’m trying to come to some kind of fair and equitable piece of legislation,” he added. “If we can’t, then it won’t happen.”

SB 613 currently states that payday loan lenders can offer two loan options to borrowers, each with long-term implications and high annual percentage rates (APRs).

The first option would give borrowers an unsecured installment loan between $605 and $1,500 for six to 12 months with a maximum APR of 192 percent. The second option is directed towards small-dollar loans, which can provide up to $4,000 across four years with a maximum APR of 99 percent. Those allow someone to use their car title as security for the loan.

It also changes the definition of criminal loansharking because Indiana law currently says lenders offering loans carrying more than 72 percent interest can be charged with a felony.

State Sen. Andy Zay, R-Huntington, listens to a bill being read during a Senate Education Committee hearing Feb. 21, 2017. (TheStatehouseFile.com Photo/Zoie Richey)

Sen. Andy Zay, author of SB 613, told the House Financial Institutions committee that the bill offers choices for people with low credit scores who are targeted by the current payday loan system.

“We have to acknowledge that that marketplace exists, and the challenge is how are we going to regulate it, how are we going to take care of the bad actors in that agreement, how are we going to put each of those protections in place,” Zay said.

Brian Burdick, a lobbyist for lenders including Check Into Cash and Community Choice Financial, said the bill will help a growing subprime loan market.

“The folks that oppose this bill, I think do it with a pure heart and just have a different point of view. I share that. I wish people would go borrow with Chase and Old National [banks], but that’s not the way the world works,” he said. “So we need to have a solution. This problem does exist and you can’t just wish it away.”

He and Zay argued that the bill will give Hoosiers options to rebuild their credit so that they can go to a bank in the future for loans.

Steven Bramer, Jr., a 38-year-old disabled Iraq War veteran from Hammond, testified before the House Financial Institutions Committee Tuesday, March 26, 2019. (TheStatehouseFile.com Photo/Dionte Coleman)

Opponents, though, argued that there are non-profit agencies to help people in need, and that payday lenders only deepen the financial hole many find themselves in.

Steven Bramer Jr., a 38-year-old disabled Iraq War veteran from Hammond, spoke at a news conference earlier this month against SB 613. He returned to the Statehouse Tuesday to urge lawmakers not to pass it.

Noting his 5-year-old daughter asked him why he had to come to Indianapolis, Bramer said he hopes someday she can point to her dad as someone who stopped this bill from becoming law.

Bramer told the committee he fought addictions after getting back from Iraq to cope with the pain of his battle scars. After eight years of sobriety, he said, he found a new substance in payday loans.

“I am the Hoosier you are thinking about when you see those loans. I am a middle-class father who has to support his wife and four daughters. I am the Hoosier that will likely look at a loan like this at some point, but I’m here to tell you this bill is bad,” Bramer said.

Also opposing the bill were members of the Indiana American Legion, led by retired Brigadier Gen. James Bauerle. He cited a 2006 study by the federal Department of Defense that “predatory lending undermines military readiness, it harms the morale of the troops and their families and adds to the cost of fielding an all-volunteer fighting force.”

Bauerle said the defense department recommended a 36-percent cap on loans, including all fees.

“This was passed as the Military Lending Act by Congress to protect the active military service members and their families. It does not protect veterans, our Indiana National Guard members, or our reserves who reside in the state,” he said.

The committee has just under two weeks to see if the compromise Burton asked for can be reached.

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