State Legislation

Below are states that recently passed legislation or are considering new legislation that could limit access to short-term credit.

Updated October,  2011

ARIZONA

The 2000 law that allowed payday lending in Arizona expired in July 2010. The annual interest rate for short-term loans is now capped 36 percent, a rate that makes it impossible for most lenders to operate. Many payday loan stores have shut down in the state.  A survey of CRC membership in the state found that 100 percent of respondents had bounced a check since short-term payday loans are no longer an option.

CALIFORNIA

Legislation in California that would raise the limit on short-term loans from $300 to $500 has passed the House Committee on Banking and Finance and House Committee on Appropriations.  Increasing the short-term loan limit in California is an important step toward greater access to credit in the state.

COLORADO

Some of the fees and loan terms associated with payday loans changed in August 2010. The minimum loan term is now six months and lenders may charge the following: a finance fee of 20% of first $300 loaned, plus 7.5% of any amount loaned over $300; interest of 45% APR; and, a monthly maintenance fee of $7.50 per $100 loaned, up to $30 per month.

ILLINOIS

In June 2010 Illinois Governor Pat Quinn signed House Bill No. 537 which caps interest rates charged by consumer finance companies at 99 percent on loans under $4,000 and 36 percent on loans above that amount. Additionally, fees on payday loans are limited to $15.50 for every $100 borrowed over a two-week period.

IOWA

The Iowa Senate Human Resources Committee has advanced a bill (Senate File 113) that would cap the interest rates payday lenders can charge at 36 percent –a rate that will likely drive most short-term lenders out of business. The legislation now goes to the full Senate.

KENTUCKY

The House Banking and Insurance Committee defeated a bill in the 2011 legislative session that would have put a 36 percent interest rate cap on  payday loans– a rate that would have likely eliminated these loans in Kentucky.

MISSISSIPPI

Gov. Haley Barbour signed legislation (House Bill 455) that changes how payday lending companies operate and extends the existence of the industry in Mississippi for three more years. The legislation caps consumer fees at $20 for every $100 cash received for checks written up to $250. For loans on checks over $250, the fee would be capped at $21.95 per $100 cash received.  Consumers who take out the larger loans would have at least 28 to 30 days to pay it back. The new law takes effect January 1, 2012 and will expire July 1, 2015.

MISSOURI

Faith-based groups in Missouri have called for a ballot initiative that would ask voters to approve a cap on  interest rates for most forms of short-term credit in the state. If approved by voters, the rate cap would eliminate most small dollar credit options for Missourians.

In order to get on the 2012 ballot, a petition explaining the initiative must first be signed by a certain number of Missourians.  Two  lawsuits have  stopped the petition from being circulated at this time.

MONTANA

A November ballot initiative asked Montana voters to determine whether or not to cap the interest rates on payday loans at 36 percent—a rate that would likely drive payday lenders out of business. The ballot initiative passed; and as expected, short-term loan stores are starting to close throughout the state.

NEW HAMPSHIRE

A House Commerce Committee subcommittee voted to pass a bill-Senate Bill 160-that would bring payday loans back to the state. The bill will likely to clear the full committee before passing in the House.

The legislation was a result of the increased number of complaints (nearly double) about payday loans after they were effectively banned from the state in July 2010.

OHIO

During last year’s legislative session, the Ohio house passed legislation that would provide additional payday lending regulations to ensure that the lenders adhere to the 28 percent interest-rate cap Ohioans voted for in November 2008. The Senate never acted on the legislation.

Since the 28 percent rate cap, a large number of short-term lenders have shut down in the state.

SOUTH CAROLINA

Legislation that raised loan limits to $550, limited consumers to one loan at a time and created a database to track loans passed in the House and Senate, but was vetoed by Governor Sanford. The House and Senate overrode the Governor’s veto, passing the bill into law in June 2010.

TENNESSEE

The Senate has passed SB 1557, which raises the loan amount limit from $200 to $500 and  requires that online lenders lending to anyone in the state of Tennessee are regulated by the state. The bill will now go to the House for approval.

TEXAS

In 2011 the Texas legislature passed two laws regulating payday lending–House Bills 2592 and 2594. HB 2592 required credit service organizations to provide consumers with “adequate information” about the costs they face before they sign any agreements. The companion bill, HB 2594, required payday and car title lenders specifically to be licensed and regulated by the state.   The legislation was signed by Gov. Rick Perry in June 2011.

UTAH

HB113, a bill that would have created a database of people who have a payday loan or who are in default on one, was defeated by The House Business and Labor Committee. Several committee members felt that consumers were capable of making their own financial decisions.

WASHINGTON

In the spring of 2010, the Washington state legislature passed and the Governor signed a bill that reforms payday lending in the state. It limits payday loans to 30 percent of a customer’s monthly income, or $700, whichever is less. Customers who fall behind on their payments can request an installment plan to pay off the loan. And it sets up a database to track the number of loans customers take out and bars them from having multiple loans from different lenders.

This year legislation was introduced that would have repealed a year-old rule passed by the Legislature that prevents borrowers from taking out more than eight loans in a year from a payday loan company. The procedural questions of whether to take up the bill failed.

WISCONSIN

In 2010 Governor Doyle vetoed a bill that would ban auto title loans, limit payday loans to $600 and prevent borrowers from taking out more than one loan at a time because the measure did not include an interest rate cap.

In May 2011, the Wisconsin Assembly introduced Bill 150 which would limit the interest rate that a payday lender may charge to an annual percentage rate of 36 percent.  Payday loan stores have closed in other states that have imposed this rate cap, eliminating an important short-term credit option for consumers.

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Tip of the Week

The Consumer Financial Protection Bureau (CFPB) has launched an inquiry into checking account overdraft programs to determine how these practices are impacting consumers. They are asking consumers to provide comments on their experiences with overdraft protection. Has it helped? Has it hurt? Are the fees clear or confusing?
Make your voice heard on overdraft fees by submitting a comment today!

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