The House Banking Committee passed an extension of a state law exempting short-term lenders from a 36 percent annual percentage rate cap yesterday.
House Bill 455 extends an exemption allowing payday lenders to charge what can amount to a 527 percent annual-percentage rate on short-term loans of $400 or less. Currently, such short-term loans are exempt from a statewide 36 APR cap; however, that exemption expires in July 2012.
The proposed bill essentially cuts the current 572 annual percentage rate allowed to payday lenders in half by expanding the life of the loan to 30 days.
Dan Robinson, Financial Services Center President, told legislators at a Monday Banking and Financial Services Committee hearing that expanding the life of the loan beyond its current pay-day cycle will force many payday lenders out of businesses because they won't generate enough money to "keep the lights on."
The bill is currently waiting for debate on the House floor.
Also see: "Payday Lending Under Scrutiny Today."