Payday-loan protections: Don’t take steps backward
Compliments to the Orlando Sentinel for its Sunday editorial for again picking up the banner in support of payday-loan protections.
Under heavy lobbying from the paydayloan industry, the Florida Legislature is debating weakening an already porous law that limits regulation on non-bank short-term loan companies. These loans are typically given to people with lower incomes in small amounts for a few weeks to cover expenses. The loans come with a high interest rate at a hefty price. The Legislature is considering allowing the loan amounts expanded and payback periods extended. Annualized interest rates could again exceed 200 percent.
Ask yourself, “Would I take out a loan with an annual interest rate of even a quarter of that amount?”
But before answering, let’s review a little history.
In 1995, the Florida Legislature liberalized the loan industry to have non-banks loan money to perform short-term loans with paycheck and autotitle guarantees. In a few short years, the payday-loan industry expanded exponentially, with confusing loan schemes and incomprehensible terms targeting nonfinancially sophisticated low-income earners. Already in financial trouble, either through their own fault or no fault of their own, many of these customers would fall prey to these loans with high interests and penalties setting up a debt spiral. Annualized interest rates exceeded 240 percent.
The Seminole County Commission, seeing these paydayloan stores pop up like mushrooms in tawdry shopping centers near disadvantaged neighborhoods, took action by passing a regulatory ordinance in 2000 controlling the industry’s most egregious tactics. We realized the industry was targeting young members of the military, lower-income individuals and the undereducated in the community. The ordinance was passed with an effective date after the end of the next Florida legislative calendar in hopes to prod the lawmakers into action. Other Florida counties started their own ordinance reviews.
Our local legislative delegation, led by then-Sen. Lee Constantine, rose to the occasion, sponsoring successful legislation to reel in the industry statewide. It wasn’t an easy fight; however, with the Orlando Sentinel’s educational editorial series and bipartisan backing, the payday-lending law was passed. So pleased was Gov. Jeb Bush with the local effort, he chose to sign the legislation in the Seminole County Commission Chambers in the summer of 2001.
The action 17 years ago was a positive example of government “home rule” in action. This is where you allow experimentation in local cities and counties to address needs affecting their citizens, allowing for the state as whole to benefit. Just as Washington, D.C., certainly does not have all of the answers to Florida’s challenges, neither does Tallahassee have all of the answers for our local communities.
In case of payday lending, it is my hope Tallahassee does not repeat the errors of the past, by taking backward steps, putting some of our more vulnerable citizens at risk.