After more than a dozen bills aimed at regulating payday lending prompted opposition from the cash-checking industry and strong lobbying from consumer advocate, lawmakers say a possible compromise has emerged.
The compromise would give more protection and choices to customers while avoiding a crippling effect on the payday loan industry, lawmakers said.
"If we can hold this together, and keep everybody on board, everyone's going to be happy," said state Rep. Steve Kirby, D-Tacoma, who chairs the House Financial Institutions and Insurance Committee.
Payday lending has been a contentious issue in Olympia for years, but this session brought an especially high 15 bills on the topic. Many of the elements of those proposals have been absorbed into two bills - one each in the Senate and House - while measures that would have eradicated the payday industry, died in committee.
"There was more enthusiasm about introducing bills this year; legislators felt there was more of a likelihood of getting something through," said state Sen. Jeanne Kohl-Welles, D-Seattle, chairwoman of the Senate's Labor, Commerce and Consumer Protection committee.
The compromise bills would limit the size of a payday loan to 30 percent of a person's monthly income or $700, whichever is less. They would also bar people from having multiple loans at different payday companies, and set up a database to track the number of loans taken out by people.
The bill also enacts an installment plan for people who fall behind on their loan payments that would allow customers to have up 90 days to pay back a loan of $400 or less, and 180 days for a loan of more than $400 without a fee. Currently, a borrower has 60 days and must pay fees.
The bills are getting lukewarm responses from both sides of the issue.
"It's the most activity we've seen in this state, but I wouldn't call it progress, not yet anyways," said Maya Baxter, director of the Statewide Poverty Action Network.
Baxter and other advocates are lobbying to extend loan terms to repay the initial loan. Under the proposed bill, a person initially has until the next paycheck to pay back a loan. Some advocates would like to see that increased to 30 or 60 days.
Critics say payday lending is a debt trap that leaves people paying off loans for a long time, often using other payday loans, and paying heavy interest. The measures do not include an interest rate cap - an element consumer advocates have sought for years.
"I'm not really sure how it's going to affect us," said Dennis Bassford, chief executive officer of Tukwila, Wash.-based MoneyTree Inc. "There's a recognition that (payday lending) is a viable product that should be in the market place."
The industry contends its services provide a temporary financial bridge to customers in need, and warns that heavy regulation would put payday lenders out of business, throwing thousands of workers out of jobs.
Bassford said he doubts the industry will lobby for further changes, while Baxter said consumer advocates will continue to extend the loan terms.
"Lawmakers have been supporting steps that move to real consumer protection but neither of the bills address the root cause of the problem, which is the original loan," Baxter said. "It only takes one loan to put someone into this downward spiral of debt. The original debt is what traps you."
Kohl-Welles said she would have preferred that legislation go further in protecting customers, but she said a compromise had to be reached.
On Wednesday, House Speaker Frank Chopp, D-Seattle, said he supports the compromise.
"It's been a real challenge these last couple of years," Chopp said, calling it "good progress to get something that's workable and really provides a lot more consumer protection."
Lawmakers in 26 states have introduced more than 80 bills related to payday lending, according to the National Conference of State Legislatures.
The proposed bills here do not go as far as other initiates have gone in other states.
In Ohio and Arizona, voter-approved initiatives passed in 2008 reined in payday lending. Ohio voters approved a law that cut the annual percentage rate that payday lenders can charge from an average 391 percent annual rate to 28 percent, and limits the number of loans customers can take to four per year. Arizona voters rejected a ballot initiative paid for and written by the loan companies to allow them to continue charging high interest rates on small loans.
In Washington, the bills await floor votes in their respective chambers, something Kirby and Kohl-Welles are confident will happen before a March 12 deadline.
The compromise would give more protection and choices to customers while avoiding a crippling effect on the payday loan industry, lawmakers said.
"If we can hold this together, and keep everybody on board, everyone's going to be happy," said state Rep. Steve Kirby, D-Tacoma, who chairs the House Financial Institutions and Insurance Committee.
Payday lending has been a contentious issue in Olympia for years, but this session brought an especially high 15 bills on the topic. Many of the elements of those proposals have been absorbed into two bills - one each in the Senate and House - while measures that would have eradicated the payday industry, died in committee.
"There was more enthusiasm about introducing bills this year; legislators felt there was more of a likelihood of getting something through," said state Sen. Jeanne Kohl-Welles, D-Seattle, chairwoman of the Senate's Labor, Commerce and Consumer Protection committee.
The compromise bills would limit the size of a payday loan to 30 percent of a person's monthly income or $700, whichever is less. They would also bar people from having multiple loans at different payday companies, and set up a database to track the number of loans taken out by people.
The bill also enacts an installment plan for people who fall behind on their loan payments that would allow customers to have up 90 days to pay back a loan of $400 or less, and 180 days for a loan of more than $400 without a fee. Currently, a borrower has 60 days and must pay fees.
The bills are getting lukewarm responses from both sides of the issue.
"It's the most activity we've seen in this state, but I wouldn't call it progress, not yet anyways," said Maya Baxter, director of the Statewide Poverty Action Network.
Baxter and other advocates are lobbying to extend loan terms to repay the initial loan. Under the proposed bill, a person initially has until the next paycheck to pay back a loan. Some advocates would like to see that increased to 30 or 60 days.
Critics say payday lending is a debt trap that leaves people paying off loans for a long time, often using other payday loans, and paying heavy interest. The measures do not include an interest rate cap - an element consumer advocates have sought for years.
"I'm not really sure how it's going to affect us," said Dennis Bassford, chief executive officer of Tukwila, Wash.-based MoneyTree Inc. "There's a recognition that (payday lending) is a viable product that should be in the market place."
The industry contends its services provide a temporary financial bridge to customers in need, and warns that heavy regulation would put payday lenders out of business, throwing thousands of workers out of jobs.
Bassford said he doubts the industry will lobby for further changes, while Baxter said consumer advocates will continue to extend the loan terms.
"Lawmakers have been supporting steps that move to real consumer protection but neither of the bills address the root cause of the problem, which is the original loan," Baxter said. "It only takes one loan to put someone into this downward spiral of debt. The original debt is what traps you."
Kohl-Welles said she would have preferred that legislation go further in protecting customers, but she said a compromise had to be reached.
On Wednesday, House Speaker Frank Chopp, D-Seattle, said he supports the compromise.
"It's been a real challenge these last couple of years," Chopp said, calling it "good progress to get something that's workable and really provides a lot more consumer protection."
Lawmakers in 26 states have introduced more than 80 bills related to payday lending, according to the National Conference of State Legislatures.
The proposed bills here do not go as far as other initiates have gone in other states.
In Ohio and Arizona, voter-approved initiatives passed in 2008 reined in payday lending. Ohio voters approved a law that cut the annual percentage rate that payday lenders can charge from an average 391 percent annual rate to 28 percent, and limits the number of loans customers can take to four per year. Arizona voters rejected a ballot initiative paid for and written by the loan companies to allow them to continue charging high interest rates on small loans.
In Washington, the bills await floor votes in their respective chambers, something Kirby and Kohl-Welles are confident will happen before a March 12 deadline.
