SENATE APPROVES INTEREST RATE CAP AND CONSUMER CREDIT STUDY

FOR IMMEDIATE RELEASE                                                        Thursday, February 14, 2008

Contact: Senator David Gottesman

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SENATE APPROVES INTEREST RATE CAP AND CONSUMER CREDIT STUDY

CONCORD – The Senate passed two bills today aimed at helping consumers who need short term loans by setting limits on payday lending and approving a commission to study better consumer credit options in New Hampshire.

The Senate voted 14-9 in favor of House Bill 267, setting a 36 percent interest rate cap on all small loans – a move that primarily impacts payday and title loans which charge much higher interest rates. The bill already passed in the House but the Senate version changes the effective date, moving it out to January 1, 2009 so it will have to go back to the House for concurrence.

“Be aware, this is an industry where the typical borrower pays back $793 on a $325 loan after getting mired in five or more loan transactions,” said Senator David Gottesman (D-Nashua).

“Welfare officers from Portsmouth, Keene, Merrimack, Nashua and Manchester all testified in support, saying they had direct experience with people who were coming to them for help when they were unable to get out from under mounting debts brought on by payday and title loans. In essence, we the taxpayers end up subsidizing the payday loan industry when our people get caught in a debt trap and can’t pay their rent, food or electric bills,” Gottesman said.

Senators acknowledged that payday loans did help some customers, but many more get sucked into loans that grow faster than they can pay them off.  “When a service creates at least as much harm as it does good – and in this case, I’m afraid it does far more harm than good -- there’s clearly no net benefit,” said Senator Harold Janeway (D-Webster).

The Senate also voted 17-6 for Senate Bill 472, sponsored by Gottesman, which calls for a study commission to look at options for consumer credit in New Hampshire, the impact of predatory lending practices and the potential for the development of new products to provide responsible consumer credit to people. The 17-member commission would be required to report its findings and recommendations by Nov. 14, 2008. That bill now heads to the House.

“I think that the wide range of banking, credit union and consumer representatives that will do the work on this commission will be able to increase the market for basic financial services and short-term cash options within the 36 percent rate cap. We already know some of them are moving forward,” said Senator Lou D’Allesandro (D-Manchester).