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[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 military Rep. 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 exist Discussion of the claim about the public need for this service - Univ. of North Carolina study: borrowers found other ways to address their financial problems - 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 money Extended 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 an unregulated industry? - Pitts: Industry should have particular evidence that risk exists and that borrowers will be harmed - 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 people behind and don’t provide alternatives. I think we need to keep looking at this. We need to 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 that people 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 take into account the individual’s income to determine what kind of bankruptcy they are eligible 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 service the loan - Problem of Internet lenders: higher APRs, no way to reach lender, communication is ignored - 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 principal Doug Fox - We determined that we had to warn our students about state law and the fact that they could be vulnerable to be taken advantage of here: we put in place a mandatory training session, “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 around colleges 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 students that 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 families created 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 significant impact; 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?
Tom Peters (continued) - Johnson: Why would someone who could qualify to get a better loan from a more traditional lender go to a payday lender? - C. Johnson: It appears to me as you go from these different institutions the difference in APR is just based on the risk to the institution - C. Johnson: I don’t know where people are going to get money when they don’t have access to this industry - P. Johnson: Asked question about rolling over loans not paid after 2 week term vs. default. Indicated some confusion between not paying loan on time (and rolling it into a new one) vs. default Corky Neale - Online payday lending is more abusive: higher APR - In order to get one of these loans you have to provide them with direct access to your banking account - Unlicensed, unregulated, have no employees here, don’t pay taxes here but they are quite willing to take the money from our citizens - Often they don’t even try to collect their debts they simply sell them to debt collectors - McManus: It is too bad that this can’t be regulated as it could be a cheaper option since there is less overhead with internet operations. You are seeing no benefit to internet lending? Neale: Not as it is currently structured. If it could be something like lendingtree.com then maybe. - McManus: Isn’t this a federal issue? Neale: So far it has not risen to the surface at the federal level? Rep Richardson - We have been meeting with advocates all across the state and tried to bring to you bills that would provide consumer protection - Internet bill seems to be one that many people are interested in. We will be talking with the industry about that bill this week and hope to have a compromise. - Request to roll all of these bills: HB3111, HB3112, HB3113 - HB3512 (will take off notice, but I want you to hear from the credit union at the next meeting) Rep. Johnnie Turner - Due to the lack of the quorum [some Reps had left] and the time of the day I would like to roll the bill—is there an assurance that there will be an opportunity to be heard. Answer: Yes