Washington State’s year-old law limiting payday lenders has backfired, some of its supporters say, forcing some consumers to find even more predatory loans online. That realization is pushing some of the law’s former backers to suggest a repeal, according to a story by the Tacoma News Tribune.
The law is pushing low-income borrowers into “the wild west” of unregulated online loans, which often have higher fees and no credit limits than traditional payday loans, Washington State Rep. Steve Kirby told the newspaper.
“The evidence would seem to indicate that consumers are seeking higher cost, unregulated products,” said Kirby, a Democrat from Tacoma.
[Article: Fake Payday Loan Collector Scam Continues]
The law, passed in 2009, limited each borrower to a maximum of eight payday loans in a year, and limited the amount they can borrow to $700 or 30% of their monthly income, whichever is lowest.
Consumer advocates worry that repealing the law may be an overreaction. They support increased education about the dangers of payday loans, and new laws that could make online loans more affordable.
“Let’s attack the problem in a direct and focused way,” Beverly Spears of the Statewide Poverty Action Network told the News Tribune. “Let’s build on the existing law and pass new protections on internet loans.”
Kirby has introduced a bill to repeal the measure. It remains in committee.
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Image: Gregory F. Maxwell, via Wikimedia Commons
Christopher Maag Contributing writer for Credit.com, Chris graduated with honors from the Columbia University Graduate School of Journalism, and has reported for a number of publications including The New York Times, TIME magazine and Popular Mechanics. Reach Chris via email at chris@credit.com.
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Why didn’t we limit the interest rate and fees on the business side, rather than putting the pressure on the people who need the money? Seems bass-ackwards to me…
Hi Andrew. I know, Washington’s law is different than most states, for exactly that reason. I assume it has something to do with either the state constitution or a political deal that was worked out among lawmakers, but I don’t know why they would make the limitations on the consumer side like this.
I FEEL IT IS AGAINST THE CONSTITION OF THE UNITED STATES OF AMERICA, TO LIMIT THE AMOUNT OF LOANS A CUSTOMER CAN HAVE.
ALSO I DON’T UNDERSTAND WHY PAYDAY LOAN CO. HAVE SUCH A BAD RAP IN THE FRIST PLACE, IF I WAS TO TAKE A LOAN OUT FOR $500.00 THE FEE WOULD BE $75.00. IF I DID NOT PAY THAT LOAN AND IT WAS RETURNED FROM THE BANK I WOULD NOW OWE ANOTHER $25.00 FEE FOR THE RETURNED CHECK FOR A TOTAL OF $600.00 IF THE PAYDAY CO. LETS ME PAY IT OFF, IN PAYMENTS OR THE ENTIRE BALANCE I WOULD STILL JUST OWE $600.00 THERE IS NO MORE FEE OR INTREST A PAYDAY STORE CAN CHARGE UNLIKE A CREDIT CARD WHO CAN KEEP ADDING MORE INTREST AND LATE FEE AND SO ON, JUST LIKE THE RIP OFF BANKS. I WISH THE STATE OF WA. OFFICIALS WOULD STAY OUT OF THE VOTERS OWN PERSONAL FINANCES. THANK YOU, JEANNIE
Eliminating the product doesn’t eliminate the need. In states that payday lenders have been banned, you see banks nsf profits doubling (at minimum) and more people having to go online for loans. While online lenders are a necessity, it is nice when you are dealing with someone in your own back yard that you know. I work for a payday lender and the customers that come through my doors are my neighbors in my community. I go out of my way to help them. The legislatures don’t think about the outcomes when they are passing these laws unfortunately.