Payday loans generate debate

Legislator argues against bill that would allow interest rates up to 222 percent

A bill that would create a new class of high-interest loans aimed at low-income Indiana borrowers has passed the Indiana House of Representatives and is working its way through the Indiana Senate.

Under that measure, payday lenders could charge interest on small loans at rates more than triple what Indiana law currently defines as criminal loansharking, said Sen. Greg Walker, R-Columbus.

House Bill 1319, authored by State Rep. Martin Carbaugh, R-Fort Wayne, would allow storefront lenders to offer three- to 12-month loans of $605 to $1,500 with annual percentage rates up to 222 percent, Walker said.

Under current Indiana law, rates of more than 72 percent are considered felony loansharking. Payday lenders can offer higher rates, but only for smaller loans.

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HB 1319 was approved 53-41 by the Indiana House on Jan. 31, and has been assigned to the Senate Committee on Commerce and Technology.

”Even though the fees and percentage charged for those loans sounds outrageous, it’s better than what options some folks have now,” said Rep. Sean Eberhart, R-Shelbyville, who represents the northeastern section of Bartholomew County.

Eberhart spoke during Monday’s Third House legislature forum, hosted by the Columbus Area Chamber of Commerce, which drew about 60 people to the Mill Race Center.

For low-income Hoosiers, their borrowing options may be limited to short-term payday loans or borrowing from a loan shark, Everhart said.

Opponents that include social service agencies, veteran groups and religious organizations argue these loans are predatory on vulnerable low-income Hoosiers and could result in perpetual debt.

Walker said he introduced a different bill this year, Senate Bill 325, that would have capped annual interest rates at 36 percent on all loans, but his proposal failed to move out of the Senate.

Wage level discussion

A related discussion Monday dealt with wage levels in Indiana.

Local Democrats that include Columbus city councilman Tom Dell, Bartholomew County Democratic chairman Bob Hyatt and Steve Schoettmer, a Democratic candidate for District 69 in the state House of Representatives, encouraged Eberhart to advocate for better wages for Indiana workers.

It’s a topic that has been addressed statewide after a Midwest Economic Policy Institute study was released late last month.

The study indicated that the 2015 repeal of the prevailing-wage law in Indiana “has failed to produce any taxpayer savings on school construction projects and has had a negative effect on wages, job growth, productivity and other economic and industry indicators.”

Specifics of the study that cover the past three years indicate:

An 8.5 percent drop in wages in blue-collar construction jobs.

A 15.1 percent drop in wages for the lowest-paid construction workers.

A 5.3 percent slower rate of productivity compared to neighboring Midwest states with prevailing wage laws.

A 1.5 percent slower rate of job growth in public works than neighboring Midwest states.

In response, Eberhart said he believes the free market, rather than government, should set minimum wage levels.

With record-low employment and a strong economy, there are many opportunities and pathways for low-income Hoosiers to earn bigger paychecks, Eberhart said.

Speaking in agreement, Brian Martin of Columbus said low-income workers who can’t live on a minimum wage from a full-time job need to find a better-paying occupation.

Redistricting

After two bills dealing with redistricting died in an committee chaired by Rep. Milo Smith, R-Columbus, a number of residents brought their questions and concerns to Monday’s Third House meeting.

Smith was not able to attend, however, due to other matters facing a Wednesday legislative deadline.

Bartholomew County Democratic Central Committee officer Dennis Baute said Smith’s refusal to hold hearings on two redistricting measures is shaking the public’s trust and confidence in state government.

Addressing State Sen. Greg Walker, Baute said he wants to know how Walker’s Senate Bill 326, which established criteria for redistricting, could pass the Senate 42-6 only to die without a hearing in Smith’s committee.

Walker explained that he was able to convince many of his Senate Republicans that redistricting criteria needed to be established this year. However, he was less successful in persuading House Republicans, Walker said.

While Eberhart said he agrees in principle with Walker’s bill, the Shelbyville lawmaker said he is still siding with Smith and House Speaker Brian Bosma on the issue.

Both Smith and Bosma stated last week they felt it would be best to wait until the U.S. Supreme Court rules on a Wisconsin gerrymandering case before creating new redistricting criteria for Indiana.

Besides Walker’s bill, Smith also refused to schedule a committee hearing for House Bill 1014, authored by State. Rep Jerry Torr, R-Carmel. That measure, which reached Smith’s committee Jan. 29, would have created an independent redistricting commission.

Overview: House Bill 1319

House Bill 1319 would allow storefront lenders to offer three- to 12-month loans of $605 to $1,500 with annual percentage rates up to 222 percent.

Under current Indiana law, rates of more than 72 percent are considered felony loansharking. Payday lenders can offer higher rates, but only for smaller loans.

Source: State Sen. Greg Walker, R-Columbus

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Mark Webber is a reporter for The Republic. He can be reached at mwebber@therepublic.com or 812-379-5636.