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03.23.10 payday lending hearing util and bank subcommittee

03.23.10 payday lending hearing util and bank subcommittee

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Published by carolmccullough
Notes from part one of the payday and title lending hearing of Utilities and Banking Subcommittee of the House Commerce Committee of the TN Legislature during 2010 session.
Notes from part one of the payday and title lending hearing of Utilities and Banking Subcommittee of the House Commerce Committee of the TN Legislature during 2010 session.

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Published by: carolmccullough on Mar 26, 2010
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Payday Lending HearingUtilities & Banking Subcommittee of the House Commerce CommitteeMarch 23, 2010
[Refer to the end of this document for a list of the bills up for discussion.]
Rep. Stewart asked to add amendment to HB3111. After discussion and a vote, it was added.-
Mentions states that banned payday loans-
Mentions cap on loans to militaryRep. Stewart refutes claims that rate cap will kill the industry-
Ohio has a 28% rate cap and there are still payday loan outlets-
Those who are running their business well should continue to existDiscussion of the claim about the public need for this service-
Univ. of North Carolina study: borrowers found other ways to address their financialproblems-
Rep Phillip Johnson asks question about default rate-
Rep Hackworth asks question about where people find money
Rep Stewart: I can’t testify authoritatively where people are going to get the moneyExtended Q&A session-
Rep Pitts asks Why 100%? -- designed to be higher than federal cap-
Rep Pitts asks about numbers of complaints and type of complaints—do we have data?-
Rep Pitts: Is consumer actually getting their complaints addressed?-
Pitts: Aren’t you concerned that we are going to drive these people underground to anunregulated industry?-
Pitts: Industry should have particular evidence that risk exists and that borrowers will beharmed-
Pitts: Need to get to the table with payday lenders to come to a solution-
Pitts: I don’t want cure to be worse than the illness-
Fitzhugh: I take some responsibility here because I think commercial banks left peoplebehind and don’t provide alternatives. I think we need to keep looking at this. We needto think about doing something about the internet loans.-
Rep. McCormick: We are talking about contracts. Are the terms spelled out?
Rep. Stewart: I’m not here to address the issue of two adults in a contract-
McCormick: this seems to open the door to regulating other industries to suggest thatpeople could do a better job
Public Testimony
Mary Beth Ausbrooks, Bankruptcy Attorney-
Families typically impacted make less than median (in bankruptcy law we have to takeinto account the individual’s income to determine what kind of bankruptcy they areeligible for)-
Relationship of payday lender and borrower is not a short-term loan-
Story of Jane: 7 payday loans with total $1500; paying $400 per month just to servicethe loan-
Problem of Internet lenders: higher APRs, no way to reach lender, communication isignored-
Rep McManus: Are payday borrowers more desperate than title pledge borrowers?-
McManus: So one is not more desperate than the other or less likely to repay-
Ausbrooks: Months go by and they don’t touch the principalDoug Fox-
We determined that we had to warn our students about state law and the fact that theycould be vulnerable to be taken advantage of here: we put in place a mandatory trainingsession, “Manage your Money” and we share what legislation reform could do for them-
If there is a college, you can see a heavy concentration of these businesses aroundcolleges taking advantage of impulsive borrowers-
Happy to see many leaders working together on education-
I would suggest that this is a market that was manufactured in this legislature-
Rep. Montgomery: I want to commend you on the education point-
Rep C. Johnson: Do you inform them about the financial liabilities associated with loans,furniture purchase, etc? (Fox: Yes)-
What percentage take out payday or title loans? Fox: Don’t have that data.-
Rep. Philip Johnson: What about rent to own? Does the training instill in your studentsthat they are obligated for the debts they incur? (Fox: Yes)Tom Peters-
Demand for payday loans—is it a necessary evil? Is there a large gap for familiescreated if payday lending goes away?-
87% of all new loans are rolling; 50% are taken out at first opportunity-
Churning of the loans costs households in the US $3.5 billion in fees every year-
North Carolina study: impact of lack of payday lending storefronts—no significantimpact; vast majority did not see an impact and others said it had a positive impact-
Loan volume is not a true indicator of need or demand: churning skews the numbers-
Rep. C. Johnson: What is the number one reason people get title loans?—Tom:probably a car repair or medical concern-
Johnson: Are people having problems if they pay it back as agreed?

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