Contact Our Legislature and Speak Up In Favor of HB 29

Our state legislature has an on-line form available for constituents to reach their elected officials. The form is available here:

http://leg.mt.gov/css/sessions/60th/legwebmessage.asp

HB 29 is currently in the House Business and Labor Committee. Members of the House Business and Labor Committee are listed below with their email addresses.

Additional Legislature Contact Information

http://leg.mt.gov/css/default.asp

Fax
House FAX number: (406)444-4825.
Senate FAX number: (406)444-4875.

---

 

Payday Lending in Montana, A Cause for Concern
and a Case for Reform

January 16, 2007

Every year thousands of hard working Montanans become trapped in an inescapable cycle of lending.  Of the states that permit payday lending, Montana has the third highest allowable APR.  The payday lending industry, or predatory lending industry as it is referred to in financial publications, has seen enormous growth.  In 2003 the industry reported $40 billion in sales nationally—a 400% increase from just three years earlier. 

Recognizing the debt cycle plaguing low to moderate income workers, this past September the United States Congress capped the interest rates for payday and title loans for members of our nations military and their families at 36% APR.  With incomes similar to military personnel, Montanans are not protected by Congress' interest rate cap, typically paying 650% interest on payday and title loans.

Many of the lenders in the State are not Montana businesses; instead, they are regional or national chains siphoning profits out of state.  Though payday and title lenders claim a significant number of their customers are single use borrowers, only 1% of all payday loans go to one-time emergency borrowers who pay their loan within two weeks and do not borrow again within a year.

Consumers have a legitimate need for access to capital, so HB 29 proposes to make pay-day loans more reasonable.  HB 29 will:

· cap loans at 25% of a consumer's net income or $300, whichever is less;

· cap the APR at 36%, the same cap Congress approved for military personnel;

· create a database to ensure that consumers have only one outstanding loan at a time;

· establish mandatory repayment plan provisions upon consumer request for a loan in default;

· prohibit additional loans to consumers who are under repayment plans, preventing the "debt trap"; and

· increase the license renewal fee for lenders from $125 to $500 and the annual exam fee from $187.50 to $250.

 

Title lending provisions in the same bill will:

• cap the APR at 36% and require that lenders disclose the APR to consumers
• establish a minimum 30-day term for title loans
• define title loans to exclude property that serves as a residence (mobile homes)
• prohibit fees not expressly allowed for by this Act
• establish a complaint and hearing process for violations through the Division of Banking

Consumers need access to capital, but it is unfair to charge the poorest in our society exorbitant interest rates, driving them into inescapable debt.  By capping the interest rates at 36% APR, HB 29 would allow pay-day and title lenders a very generous profit, but at more affordable rates for their customers.

Contact your legislative representatives and let them know your position.  Unfortunately the bill is being lobbied against by agencies that are willing to make large investments in keeping us the state with the third highest allowable interest.  On Monday evening one opponent of the bill discussed the unfairness of targeting payday lenders.  Credit Unions and Banks are not charging 650% APR. 

Final Figures

• 91% of payday loans are made to borrowers with 5 or more loans a year.  This indicates an inescapable [predatory] lending cycle.

• The payday lending industry has exploded in the last decade, reporting $10 billion in sales in 2000.  This number rose dramatically to $40 billion, $6 billion coming solely from interest rates and fees in 2003. 

• In Montana payday loans are for an average of 14 days at 650% APR.

Ready to Act? Go to the top of the page and take action.

© 2006, Consumer Credit Counseling Service

Disclaimer • Privacy Information