February 22, 2017 // National

ICC celebrates a victory: Payday lending expansion defeated

Brigid Curtis Ayer 

Indiana Catholic Conference

INDIANAPOLIS — The Indiana Catholic Conference celebrated a legislative victory after a bill to expand payday lending practices in Indiana was defeated Feb. 16, by members of the Senate Insurance and Financial Institutions Committee and a 4-5 vote.

Glenn Tebbe, executive director for the Indiana Catholic Conference, who joined 18 other organizations to testify before the panel in opposition to the proposal, called the defeat of the bill “a victory.”  He said, “There are better ways to help low income persons cover needed expenses rather than expanding a payday loan product with a 216 percent annual percentage rate.”

The proposal, Senate Bill 245, authored by Sen. Travis Holdman, R-Markle, was amended in committee to make it more palatable. Holdman said, “If we don’t get the bill to a place we are all comfortable with, it won’t move past second reading.” He added, “We are not going to push this over the goal line until everyone is comfortable with the language.”  Some of the key changes of the amendment include: lowering the monthly interest rate from 20 percent to 18 percent; reducing the loan maximum from $2,500 to $1,750; removing late penalties; and reducing the payback time.

Tebbe told the panel members during his testimony that even in its amended form, the church remained concerned about the bill because it would encourage lower income persons to get trapped in debt and a process of recycling the loans. “We see this as a moral issue because it takes advantage of the distress that these families are in,” said Tebbe.  “The Catechism of the Catholic Church says the seventh commandment is violated when people do things such as taking or keeping the property of others. This also includes business fraud, paying unjust wages or forcing up prices and taking advantage of ignorance or hardships of another. Taking advantage of someone and exploiting them is wrong,” said Tebbe. “I know that is not your intent here, but in our view, it is realistically the effect.”

Kathy Williams, representing Indiana Community Action Coalition, said while she appreciated efforts to reduce the interest rate of payday loans, the interest rate would still be 18 percent per month and 216 percent APR, a rate that is far too high for lower-income lenders to shoulder. Willliams said research on low-income borrowers by the Pew Research Center, a nonpartisan think tank based in Washington, D.C., indicates loans should not exceed 5 percent of a person’s monthly income, but this proposal would translate to 20 percent.

Marcie Luhigo, representing The Creek Christian church, a 4,000-member church on the southeast side of Indianapolis, told the panel, “Every year our church gives $200,000 that I’m in charge of distributing to those in financial need in our community. I can tell you that in my five-year tenure that hundreds have come to us with payday loans that they are unable and incapable of repaying. We would oppose any expansion of payday lending,” said Luhigo.

Jim Bauerle, a retired brigadier general who served 32 years, said one of the biggest problems in the military is financial hardship experienced by young soldiers and those returning from deployment. He said that many of them experience unemployment and homelessness and some get themselves into debt by these types of high interest loans. Bauerle said his parish on the north side of Indianapolis takes in needy veterans and they contribute 10 percent of their weekly collections to help those needing financial assistance or to pay for household repairs.

Representatives of several other organizations testified in opposition to the bill, including the Indiana Institute of Working Families, United Methodist Church, Christian Legal Aid, the Society of St. Vincent de Paul, Indiana Synod Evangelical Lutheran Church of America and several veterans groups.

Heather Willey, representing payday loan providers, testified in support of the bill, saying the proposal has retained safety procedures that includes lending to the employed with bank accounts, and that loans may not exceed 20 percent of the borrower’s gross monthly income.

Lawmakers on the panel were not convinced the bill was prudent or needed. Two lawmakers who supported the bill did so to give the author an opportunity to work on the bill, but were not convinced of the bill’s merits. Five members who voted against the bill recognized the negative effects of these loans on families. Sen. Eddie Melton, D-Merrillville, said he felt the industry needed “more transparency” and voted no.  Sen. Roderick Bray, R-Martinsville, said while he appreciated the efforts to make a good product, he has not detected a “human cry” for this product.  Sen. John Ruckelshaus, R-Indianapolis, also voted no saying he was “not comfortable going forward.”

Tebbe said even though this bill has been defeated, the topic could be resurrected and amended to another bill before the General Assembly adjourns. “The ICC and others plan to work toward stopping it if necessary,” Tebbe said.