A payday lending bill that would replace the short-term payday advance loans with six-month installment loans was passed over in Monday’s House General Government and Information Technology committee, the last meeting scheduled before Tuesday’s fiscal committee cutoff deadline.
SB 5899 was scheduled for a vote in Monday’s executive session, but because the committee did not take a vote on the bill, it looks unlikely to pass this session.
Under current law, payday loan companies can offer short-term cash advances of up to $700, which come with a $95 fee.
The bill would allow lenders to instead offer a $700 payday loan with a six-month term. The lenders could charge an interest rate of 36 percent, as well as as origination and maintenance fees.
That would be a lot of money, said Bruce Neas of Columbia Legal Services on Monday.
“The bill in front of you will allow a $700 loan for six months to cost $450. We think that’s unreasonable,” he told the committee.
But Dennis Bassford, CEO of Seattle-based payday loan company Money Tree, told lawmakers borrowers want the longer terms to pay off their loans.
“Our consumers do not like the current rationing program that we have in this state of Washington for the current product,” he said.
Bassford said in Colorado, which allows for six-month installment payday loans, most borrowers pay off their loans before the end of the term.
However, a variety of representatives of groups providing services to low-income earners have argued in committees against the bill this session, saying that the fees on the six-month loans threaten to keep people in debt.
Seattle resident Afam Ayika testified against the bill and told the committee that many people like him who earn low wages can get into a “debt trap” because of the low fees.
“I have been in the payday loan cycle for years for a time. It’s emotionally debilitating, you work hard for your money,” he said. “You could have used that to buy your kids shoes. You could have used to feed your children.”