Senate Bill 5312 is such a bad idea, one of its cosponsors ended up voting against it.
Even so, the legislation – essentially an end run around much-needed payday lending reforms the Legislature made in 2010 – passed the state Senate last week 30-18 and now is in the House. There it will be shepherded by state Rep. Steve Kirby, D-Tacoma, a longtime champion of the payday lending industry.
Passage in the House would be unfortunate and most certainly would result in more vulnerable, low-income people being exploited by an industry that has a long history of doing just that.
SB 5312 creates a new type of high-interest loan, one that would effectively allow interest rates of almost 220 percent. Because it’s considered an installment loan, it would allow payday lenders to skirt military restrictions on payday loans to service members.
Cosponsor Nick Harper, D-Everett, ended up voting against the bill because it needs so many changes – which are unlikely to be made in the House. He didn’t see the need to rush it through.
With all the problems facing the state, why was this legislation fast-tracked? Consumer groups and advocates for the poor aren’t begging for it. On the contrary, they’re opposed to it.
No, this legislation is being pushed by the payday lending industry, a big donor to politicians. Just one lender, Moneytree Inc., and its executives have contributed more than $200,000 since 2010. The people hurt by high-interest payday loans have no such lobbying juice behind them.
These loans can create real hardship for families, who might turn to welfare programs for food, housing and health care because they must spend so much of their income paying sky-high interest rates.
In a new report, the Pew Charitable Trusts says the average payday loan requires repayment of more than $400 in two weeks when the average borrower can only afford to pay $50. Borrowers end up extending the life of the loan, which increases its cost, or taking out new loans with other lenders to pay off other loans (they’re allowed to take out eight annually). Before long, many find themselves in financial holes so deep they can’t escape.
Some senators apparently voted for SB 5312 because they were under the impression it would generate revenue in licensing and fees. But the state budget office refutes that, saying it would cost the state more than it would bring in.
That point needs to be forcefully made in the House. This legislation is bad for the state and bad for low-income people. If this legislation passes, Gov. Jay Inslee should veto it.
Who voted how
South Sound senators voting yes for Senate Bill 5312: Randi Becker, Mike Carrell, Bruce Dammeier, Tracey Eide and Pam Roach. Voting no: Steve Conway and Jeannie Darneille.