House passes payday lending, but keeps it

Published 12:06 pm Tuesday, February 15, 2011

JACKSON — Supporters say the final version of a payday lending bill that passed the Mississippi House on Monday could reduce consumers’ out-of-pocket expenses for short-term loans, but the fight might not be over.

Even though the measure passed on a 76-43 vote, opponents held it for the possibility of more House debate before it can move to the Senate. Foes say it does too little to stop payday lenders from trapping consumers in a cycle of debt.

“You know that the poor are being taken advantage of in this state,” said Rep. Robert Johnson, D-Natchez.

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Under current law, check-cashing companies can charge fees equal to 572 percent annual interest rate in Mississippi, one of the poorest states in the nation.

Leaders of the Baptist, Catholic, Episcopal and Methodist churches have lobbied against payday lending practices.

A person receiving a payday loan in Mississippi writes a check for the amount borrowed, plus a fee that currently can be up to $21.95 per $100 borrowed. Loans of up to $400 are allowed. The lender can cash the check if the borrower fails to repay the loan on time. Borrowers sometimes take out multiple loans to cover their costs.

Most payday lenders now typically write 14-day loans.

The bill that passed Monday would give consumers up to 30 days to repay loans and cap fees at $20 for every $100 borrowed, up to $250. For loans of $251 to $500, the fee would be $21.95 per $100.

Giving a consumer longer to repay a loan would result in a lower equivalent annual percentage rate, lawmakers said.

House Banking Committee Chairman George Flaggs, D-Vicksburg, said the new fees would equal between 243 percent and 521 percent annually.

Flaggs said when he talks to people who receive payday loans, they have no problem with the service or with what they’re being charged.

“Most folks that I talk to say that this is a necessary tool for them to get from one payday to another payday,” Flaggs said.

Rep. John Mayo, D-Clarksdale, said the lenders are “no better than the plantation commissaries of 150 years ago.

“Being in debt is the new slavery,” Mayo said

After Mayo, who is white, compared debt to slavery multiple times, Democratic Rep. Omeria Scott, who’s chairwoman of the Legislative Black Caucus, objected.

Mayo stopped using the words “slave” or “slavery” but stuck to his objections

“We are helping to keep people in debt by passing this bill,” he said.

Mississippi has allowed payday lenders to operate in the state since 1998. Current state law expires in 2012, which means payday lenders would go out of business if legislators don’t renew it before next year.

The Mississippi House and Senate passed different versions of a payday lending bill earlier this session. The House vote Monday was on the final version produced by negotiations between three members from each chamber.

Both chambers would have to agree before a bill could go to Gov. Haley Barbour. Barbour hasn’t said whether he’ll sign a bill.