EDITORIAL: Slow it down

By NEMS Daily Journal

A rising chorus of caution and the voice of an influential House chairman may have slowed what many have called the rushed passage a bill reauthorizing – a year early – Mississippi’s “payday” lending act.
Payday loans, in the eyes of state consumer groups and some religious leaders, amounts to predatory lending on people who can least afford the high fees and interest rates, annualized as high as 574 percent.
House Banking Chairman George Flaggs, D-Vicksburg, whose committee sent to the House a bill that passed early last week, said Friday the payday lending industry in the state and nationwide appears to have become too influential in the process of what is essentially a consumer protection and fairness issue.
Flaggs said in-state payday lenders and out-of-state companies are fighting among themselves, with both groups “trying to pass a bill based on their calculations of profit margins. I don’t think that is fair to consumers.”
The Senate passed its similar version of a payday lending bill on Friday.
Now, it appears, the issue may be appropriately slowed for further, deeper consideration by a conference committee or in the House itself.
The two chambers must agree on an identical bill before any laws are changed or reauthorization is readied for enactment.
Mississippi and Wisconsin have the highest annual percentage rate – 574 percent – on payday loans, based on December 2008 statistics from the Center for Responsible Lending.
Under proposals passed by the House on Tuesday and by the Senate on Friday, that annual percentage rate would drop to less than 300 percent. Other financial institutions are capped at 36 percent.
Many consumer advocates like Ed Sivak with the Mississippi Economic Policy Center want the state to use a data system as do 13 other states, to prevent a person from getting loans from multiple lenders, which quickly digs a deep financial hole for borrowers that’s virtually impossible to climb out of.
John Allison, Mississippi’s commissioner of banking and consumer finance, has said most of the states charge a fee, between 50 cents to $1 per transaction to operate the data system, which is marketed from the private sector. Mississippi had about 1.6 million payday lending transactions in 2010.
Caution is the better track on the payday lending issue. Arguments that payday lenders offer a vital service to a segment of the population that can’t get loans elsewhere aren’t reason enough to deny regulations that protect those consumers from financial freefall. Lawmakers need to determine, without undue haste, just what the proper balance is that keeps those businesses viable without being needlessly predatory.