That seriousness Mississippi’s legislators showed back in 2012 over whether to reauthorize payday lending seemed so sincere at the time.
They could allow the payday lending industry to strengthen its hold on Mississippi’s working poor, tip the rules to increase borrower protections, or ban the low-dollar lending altogether.
The wrangling ended with lawmakers proclaiming a great comprise: Payday lending and the more than 550 percent interest charged borrowers would remain, the amount lenders could loan would climb from $400 to $500, and borrowers of amounts $251 and over would get 30 days to repay, up from the two-week limit in the old law.
Legislative leaders called the 30-day repayment period the critical tradeoff, the provision that would make the so-called Check Cashers Act less exploitative while ensuring Mississippians would have access to short-term, small-dollar credit.
That, we soon learned, was all make believe.
Lenders could loan the extra $100 and take in an additional $21.50 fee and ignore the 30-day rule, which turned out to be no rule at all.
Was this by design?
It seems so. What else can we make of the refusal of current legislative leaders to make the rule a real rule? Rewind to the 2012 legislative session. Payday lenders and their lobbyists argued hard against giving borrowers a month to repay what the legislation termed second-tier loans, a designation that went to all loans $251 and over. They pleaded that having money go out the door for a full 30 days would seriously hurt cash flow and likely put some of the smaller lenders out of business.
The solution legislative leaders settled on: Set up a two-tier lending rule by which loans $250 and under must be repaid in a two-week period. Leave the 30-day repay period to the second-tier loans and apply it to loans of $250 or more.
Lenders could issue a series of simultaneous loans in $100 increments up to the new cap. The beauty of it all – at least for the payday lenders – was the ability to make the same fees from a two-week loan as a 30-day loan. Only lenders OK with letting go of their cash for 30 days at a time would make the second tier loans.
So no one was surprised when payday lender All American Check Cashing of Madison, under investigation by the state for illegal payday loan rollovers, emphasized in training documents that second-tier loans requiring the 30-day repayment term must not be made.
For the borrowers, those extra two weeks can be critically important. Without, the borrower can be more easily snared into a debt trap the lender sets.
Most payday-loan borrowers in Mississippi and elsewhere can’t pay off loans in the short spans allowed, Pew Charitable Trusts says its surveys have found. Americans spend $7.4 billion per year on the high-interest rate loans, Pew says, and points out that borrowers pay an average of $520 in fees and end up indebted for five months of the year.
Witnessing the unfolding of the Check Cashing law ruse three years ago, Rep. Adrienne Wooten tried to convince fellow Democrat George Flaggs, chair of the House Banking Committee, to limit loans of $100 and above to a single check, thus ensuring the borrower got the 30 days to repay.
Mr. Flaggs, who left the Legislature a year later and is now mayor of Vicksburg, insisted in an interview with the Mississippi Business Journal last year that he would not have allowed the renewal bill to pass had he known the legislation offered such an easy way around the repayment period.
As Rep. Wooten, a Jackson attorney, sees it, Mayor Flaggs does not want to own up to the loophole he left in the law. “I can assure you he knew exactly what was going on,” the eight-year legislator says, describing Flaggs as a skilled gatekeeper on legislation in his committee.
Rep. Wooten has introduced the same “single-check”legislation each year since. Each time, Flaggs’ successor, Republican Hank Zuber III, has given the measure a cold shoulder.
Chairman Zuber gave Rep. Wooten’s bill the same cold treatment this year that he had the previous year. The difference this year was that Rep. Wooten has a seat on the Banking Committee. Even that status failed to get her an explanation from the chairman on his refusal to let the panel take up her bill.
Rep. Wooten thinks she knows why: “It is not something the majority wants to take place.”
Rep. Zuber gave us an explanation of sorts in an interview in August. The chairman conceded the payday lending law needed a fix but said Mississippi legislators should not be the ones to make it.
His Senate counterpart Gary Jackson, chair of the Senate Business and Financial Institutions Committee, said the same.
Sen. Jackson, incidentally, pushed through legislation in 2013 to make payday lending permanent in Mississippi. This year he offered up a bill to protect unlicensed payday lenders from defaults by debtors. He found no takers among his colleagues, however.
Rep. Zuber and Sen. Jackson say the job of fixing the loophole in Mississippi’s law is best left to the federal Consumer Financial Protection Bureau.
That’s right — a pair of influential GOP legislators in Mississippi want to cede their decision-making responsibilities to Washington. The feds know what’s best for Mississippi, they say.
Mississippi’s legislators created the problem. They should be the ones to fix it.
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