Legislation to create a new type of loan for low-income borrowers draws criticism
State Sen. Rick Ward, R-Port Allen, has proposed creating the “Access to Credit Loan,” a new type of financial product for Louisiana, aimed at borrowers who cannot qualify for a bank loan. .
Ward says the loan could be a lifeline for borrowers facing an immediate financial emergency who don’t want to take out a payday loan, although critics say the high interest and fees allowed would allow lenders to take advantage of people having few options.
“We don’t need a whole new class of loans that will increase costs for Louisiana citizens,” said Troy McCullen, former president of the Louisiana Cash Advance Association.
When introducing his bill, Ward said loans of up to $1,500 could benefit someone who, say, has flat tires and needs money fast to replace them so they don’t lose. his job. No matter how long it takes to repay the loan, the borrower will never have to repay more than double what was originally borrowed, Ward says.
But critics question Ward’s interpretation of the bill’s wording, saying the cost could exceed 100% of the principal, and the need for the monthly ‘maintenance fee’ of up to 13% that the legislation would allow with up to 36% interest and a $50 origination fee.
“One hundred percent interest is still bad enough,” Jessica Sharon, assistant vice president of financial outreach at Pelican State Credit Union, said during a committee hearing.
Senate Bill 381 passed the Senate and House Commerce Committee.
“They’re accelerating this thing,” McCullen says.
Daily reportI emailed Ward today offering an opportunity to comment, but did not hear back in time for this report.