By Bobby Harrison/NEMS Daily Journal
JACKSON – What has appeared to be a rush during the 2011 legislative session to reauthorize the payday lending industry and change the rate it can charge consumers may be slowing.
On Friday, after about two hours of debate, the Senate passed by a 33-13 margin its version of the payday lending bill.
The controversial legislation goes back to the House, where members can accept the Senate version or invite conference to try to work out the differences.
House Banking Chairman George Flaggs, D-Vicksburg, who earlier this session put payday lending on the fast track, indicated Friday after the Senate vote it might be time to slow the process.
Flaggs said the issue has turned into a fight between the in-state payday lenders and the out-of-state companies.
“Both groups are trying to pass a bill based on their calculations of profit margins,” Flaggs said Friday. “I don’t think that is fair to consumers.”
Earlier this session, Flaggs rushed to pass a bill out of his Banking Committee and then on the floor of the House. Senate Banking Chairman Gary Jackson, R-French Camp, also has expressed interest in getting the issue resolved quickly.
Jackson passed the bill out of his committee Thursday and then on the floor Friday.
Various consumer groups and religious groups have criticized the payday lending industry and have advocated dramatic changes to limit how much consumers can be charged.
In general, consumer advocates have not been happy with the House or Senate versions of the legislation.
If the Legislature does not act by at least the 2012 session, the law that authorizes the industry will cease to exist and, theoretically, the industry could cease to exist.
Mississippi and Wisconsin currently have the highest annual percentage rate – 574 percent – on the payday loans, based on December 2008 statistics from the Center for Responsible Lending.
Under the proposal passed by the House on Tuesday and by the Senate on Friday, that annual percentage rate would be dropped to less than 300 percent. Other financial institutions in Mississippi, such as banks and credit unions, are capped at 36 percent.
But payday lending supporters say the loans – currently capped at $400 and for only 14 days in most cases – are for people who could not get a loan from a bank or other financial institution. Often, payday consumers need money quickly to pay for an emergency, such as an unplanned car repair, they say.
Many of the consumer advocates, such as Ed Sivak with the Mississippi Economic Policy Center, want the state to put in place a data system. This would prevent a person from getting loans from multiple lenders, putting them further and further in debt.
Efforts to put in place a data system have been defeated by both chambers of the Legislature.
“Who is going to pay for it?” Flaggs asked. “The governor has said he doesn’t want any fee increases in the bill. If we are not going to do any fee increases, the taxpayers will have to pay for it. I don’t think that is fair.”
During debate, members said 13 states have similar data systems.
John Allison, commissioner of banking and consumer finance, said most of the states charge a fee of between 50 cents and $1 per transaction to operate the data system. The state had about 1.6 million payday lending transactions last year.
Allison said he has heard numerous accounts of people getting multiple loans, and in one case, a person got loans from 16 different payday lenders.
The date system “would give me some other tools to track some stuff,” Allison said.