State Legislature 2013 session

[eridani]

60. Will probably get out of committee--please urge your representatives to vote against it

SB 5312 Bill Info: http://apps.leg.wa.gov/billinfo/summary.aspx?bill=5312&year=2013
Hearing Video: http://www.tvw.org/index.php?option=com_tvwplayer&eventID=2013031151


We are considering the Kirby amendment tomorrow at 9 a.m. in Business & Financial Services. Terms are better IF in response to higher amount ($1,500) and longer terms (6 months – 12 months) consumers don’t change their behavior. The APR is still high: estimated at 200% (compared to nearly 400% for traditional Pay Day loans). I will be voting "No", but it has the votes to pass out of committee to Rules.

--Cindy Ryu, 32nd LD

Here’s one story; you might know someone with a similar story.
http://povertyaction.org/real-stories-sandra-miller/

Real Stories – Sandra Miller
Sandra Miller , Clarkston, WA

“I took out my first payday loan in June 2005 amidst mounting medical bills. I had been though surgery three times on my back. After the last operation, I developed a staph infection and was forced to take additional time off of work to recover. Because I live paycheck-to-paycheck, I couldn’t actually afford to take extra time away from work, but I had no choice. Without my regular paycheck, I struggled to pay my rent and provide for my two children. One of my co-workers suggested that I take out a payday loan to help pay my rent and avoid eviction.
My first loan was for $300 and the lender gave me two weeks to repay it. At first this seemed manageable, but when my paycheck arrived, I realized that I couldn’t pay back the $300 plus interest and still pay my bills. I was told that I could just pay the interest and roll over the debt for another two weeks, so this is what I did. Unfortunately I was never able to make enough money to repay the entire debt so I continued to pay the interest and roll over the debts. Still trying to keep up with my other bills while paying the interest on the payday loans, I began going to other payday lenders. In the end, I owed $3,700 to seven payday lenders in both Washington and Idaho. I am behind on my rent, my car is falling apart, and I am struggling to provide for my children, ages 11 and 13. With help, I have been able to slowly pay off all but one of my loans and I am slowly working on paying off my final loan.

When I took out my first loan, I had no idea what kind of trap I would get myself into. I did not understand that, unlike bank loans, I would not be able to make payments toward the principle balance on my payday loan. There were no payment plans available to me; my only choices were to pay back the loan in full or pay the interest and roll over the debt. As someone who lives paycheck-to paycheck, I understand that people with low-incomes cannot afford unexpected expenses and as a result may need to use a payday lender. But, people using payday loans deserve the same protections as those using bank loans. Putting a limit on the amount of interest a lender can charge and offering repayment plans would give loan consumers a fair chance at paying off their debt rather than getting trapped in a cycle of debt.

I chose to tell my story to Poverty Action in hopes that others would understand how badly the payday lending industry needs reform. I want others to learn from my experience and to join in the fight to prevent others from getting trapped in a cycle of debt.”

These installment loans are expected to be marketed by Pay Day Lenders who have storefront presence in Washington State if ESSB 5312 becomes law.



ESSB5312
Rebuttal Information

United Way of Snohomish County does not support the creation of a new installment loan product in the payday lending industry.

1. Very little evidence that would-be borrowers are using on-line services.
a. Borrowers are not driven to seek payday loans online or from other sources. Based on research from the Pew Charitable Trust, we know that just five out of every 100 would-be borrowers choose to borrow payday loans online or from alternative sources such as employers or banks, while 95 choose not to use them. This is data from states without any payday storefronts, we anticipate that states with payday storefront, like Washington, the numbers are likely even lower. For additional information, or to view the entire report http://www.pewstates.org/research/reports/who-borrows-where-they-borrow-and-why-85899405043

b. Just because on-line providers are advertising in Washington does not mean there are many would-be borrowers using this service. I think we can all think of companies that advertise in Washington, but have very little presence in our state, like Joe’s Crap Shack or Sonic drive-in.

2. Better alternatives currently exist. Let’s create more!
a. Express Credit Union, located in King and Snohomish Counties, offers a much more affordable option.
Payday Alternative Loan: If you need emergency cash right away and require a little longer to repay it than just until your next payday – see us for a great lower-cost alternative! Members can receive a loan of up to $750 and pay a 15% flat fee on the amount borrowed. You have up to 90 days to pay off the loan in equal payments due 30, 60 and 90 days after receiving the loan. AND – when you make all payments on time, 1/3 of the fee will be deposited into your savings account to help you start saving for the future.

b. Bank On Washington and Bank On North Sound was created by government, community and financial organizations coming together to provide free or low-cost banking services. Please see the attached brochure for more information.

Katrina Ondracek, MA
Vice President, Public Policy and Community Initiatives
United Way of Snohomish County



More info:
http://www.americanbanker.com/issues/178_60/small-banks-developing-ways-to-compete-against-payday-lenders-1057863-1.html
http://blog.thenewstribune.com/opinion/2013/02/25/whats-the-hurry-to-end-run-payday-loan-reforms/
http://www.heraldnet.com/article/20130224/OPINION02/702249969
http://www.bellinghamherald.com/2013/03/21/2930522/payday-loan-bill-hurts-the-vulnerable.html