The chairman on an Indiana Senate committee has killed a payday lending bill that was widely opposed by veterans’ advocates and faith groups — including the Indiana House Speaker’s own church — who said that it would have legalized lending at rates of up to 222 percent.
Republican Sen. Mark Messmer said Tuesday that he will not give the bill a hearing in his Commerce and Technology committee. That effectively killed the measure, which was previously approved by a close margin in the House, which included a “yes” vote from Republican House Speaker Brian Bosma.
“There was really no consensus to move the issue,” Messmer, a Jasper Republican, said of the bill which would have allowed payday lenders to charge an annual percentage rate of up to 222 percent.
There “was a lot of negative reaction from the advocacy groups,” said Messmer.
Messmer’s decision came after the Republican Senate leader David Long said last week that he is “not a big fan” of the bill.
A cross-denominational group of 13 clergy members wrote a letter this month saying that the bill “opens doors for lending practices that are unjust and which take unfair advantage of people in desperate circumstances.”
The bill would have created a new type of payday loan allowing for annual percentage rates of up to 222 percent on short-term loans between $605 and $1500, according to an analysis by Indiana Institute for Working Families. That would be triple the current cap of 72 percent allowed under the state’s criminal loan sharking law.
Democratic Rep. Carey Hamilton of Indianapolis serves on the House Financial Institutions committee and opposed the bill. She said it would have allowed payday lenders to prey upon poor people who can least afford such a loan.
“They are the least likely to be able to pay off the extremely expensive loans,” said Hamilton, adding that the bill would hurt the economy as people are “struggling and digging in a deeper hole of debt and then not able to pay off.”
The bill would have created a new class of loan, required to be paid off over the course of three months to a year. Loans currently offered are typically for about two weeks.
Payday lenders argue the proposal would fill a void to serve people who need quick cash but have nowhere else to go, providing more options to consumers.
Hamilton said the current law is good enough with additional emergency resources from local groups and there is no need to expand it.