Payday lender legislation fails, but it could rise again
"The power of the lobbyists won again,” Representative Frank Ferri (D-Warwick) said yesterday morning during a phone interview of failed legislation he sponsored regarding lowering what he felt were high interest rates payday lenders charge customers. “I’m disappointed that it didn’t come to the floor so we could debate it and vote on it.”
Originally, his intent was to decrease Rhode Island’s average interest rate of 260 percent to 36 percent or lower for payday loans.
But, payday loan companies and their lobbyists, including Advanced America of South Carolina, as well as Veritec Solutions of Florida, said they wouldn’t have been able to operate under the legislation and many people in the industry would have lost their jobs had the legislation passed.
“The lobbyists convinced leadership that saving the jobs of their industry was important, and I think they misled them,” Ferri said.
Ferri said he introduced the legislation to protect people who take out payday loans because he thinks payday loan lenders prey on people who are financially strapped.
According to Ferri, the average payday lender recycles a loan nine times before it is paid off, with 60 percent of borrowers recycling a loan 12 or more times. He also said only 2 percent of borrowers pay off their loan in time.
“This whole thing was about getting people out of a debt trap and breaking the cycle,” Ferri said.
Jaime Fulmer, vice president of Advance America, a payday loan company that has approximately 2,600 locations in 29 states throughout the United States, with 20 in Rhode Island, including Warwick, Cranston and Johnston, said Advanced America would have certainly had to close had the legislation passed.
Under a 36 percent APR on a two-week loan, Fulmer said, the company would have had to charge less than 10 cents per day. He feels the legislation was an attempt to ban the product and eliminate the industry as a whole.
“The consumer advocacy folks weren’t satisfied with anything short of 36 percent, which is code for they aren’t satisfied for anything less than putting us out of business, and that’s just unfortunate,” he said during a phone interview yesterday afternoon. “There are a lot of things that can be done that are reasonable and would allow for a regulated payday lending market in Rhode Island without putting a company like Advanced America out of business. It’s too bad they chose a different path.”
He said the discussion should focus around how to best protect consumer access to credit while affording them with key protections that help them if they’ve gotten into financial trouble.
“As this issue moves forward in Rhode Island, I hope that there will be an opportunity to have more reasonable conversations about how to provide consumers with access to credit in a manner that provides them with protection,” said Fulmer. “If you don’t sit down and have that conversation, it lends itself to an argument of extremes, and that’s when consumers lose.”
From what Ferri said, Fulmer might get his chance. He said the bill could possibly be resurrected down the road.
“I’m sure I’ll bring it up again,” Ferri said. “I think it’s something that’s important enough to stay on. It’s a little disheartening this time, but we have a lot of good people on board because the message is out there. We’ll come back even stronger next time.”