MS House To Debate Extending Payday LendingBy Jeffrey Hess | Published 12 Jan 2011 08:33am |
The Mississippi House is expected to debate extending a law that permits payday lending in Mississippi. MPB's Jeffrey Hess reports that the proposed legislation would give borrowers more time to pay back the loan.
Payday lenders are businesses that make small short term loans. They charge a 22-dollar fee per 100 dollars that they lend. That is effectively a 572% annual interest rate, far in excess of the 36% cap on bank lenders.
Religious groups and poverty advocates argue that these lenders prey on the poor and elderly, and want the industry abolished. Mississippi NAACP president Derrick Johnson says that people who take these loans wind up trapped in a cycle of debt.
"Payday loans are usury. They exploit the elderly. They exploit the poor. And we find it unfortunate that an industry could exist that would be allow to charge over 500% interest and fees on individuals that are desperate are in need," Johnson said.
Those are charges the payday lending industry has vigorously fought against. Dan Robinson owns more than two dozen lending sites and maintains his fees are reasonable considering he offers high-risk loans that banks will not.
"My question is: how did all of a sudden did this become this bad thing 13 years into it when the consumers are not complaining about it, the regulators are not complain about it, the businesses are not complaining about it. The only one complaining about it are special interest groups," Robinson said.
The bill before the house would not change the fees but would mandate that costumers have at least 28 days to pay back the loan, cutting the effective interest rate in half.
House Banking Committee chairman George Flaggs of Vicksburg supports the compromise bill but wonders about its ability to pass the full house.
"Because of the special interest is having a feast over it. And when special interest gets involved normally legislatures listen to the special interest instead of their constituency," Flaggs said.
Even if the proposed legislation doesn't pass, payday lending would remain law through 2012. If it passes it would extend the law indefinitely starting July 1 of this year.
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