By Ted Carter
A 7-year renewal of Mississippi’s payday lending law – including a $100 increase in the amount that can be transacted — received an endorsement Tuesday from the state House’s Banking and Finance Committee.
Bill sponsor Rep. George Flaggs, a Vicksburg Democrat and chair of the Banking and Finance Committee, said the bill is set for a floor vote Thursday. From there, it would go to the Senate followed by a conference committee review to resolve any differences between versions approved by the House and Senate.
Payday lenders grant loans to borrowers who have jobs and banking accounts. The borrower leaves the lender a personal check that is to be deposited after the borrower’s next pay day.
The $100 increase in the amount that can be transacted brings the limit to $500. Under the current law set to expire in 2012, the borrower is limited to $323, with the remainder going to the lender as a loan fee. Flaggs’ bill allows the borrower to obtain a loan of more than $400.
The new measures drop interest calculations and replaces them with a set fee of $21.95 per $100 of money loaned. Twenty cents of each $21.95 paid is to go to the state Attorney General’s office for enforcement actions against payday lending violators and to the Banking Commissioner’s office for consumer lending education efforts.
With nearly 1,000 payday lending outlets dotting the state, the renewal of the 1998 loan regulation law is seen by opponents as an invitation to greatly increase reliance on the loans. Opponents such as the Mississippi NAACP, Mississippi Economic Policy Center and various church pastors argue the lending practice puts a large burden on the finances of working families.
Payday lenders say they represent an opportunity for a struggling worker to get by until his next paycheck. They say replacing the current law with a 36 percent cap on interest rates would force them out of business.
That would leave an opening for unregulated lending – an outcome Mississippi Banking Commissioner John Allison says he dreads.
"People would still have access to it. I just wouldn’t have any control over it," he said after Tuesday’s committee vote.
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