State of Washington governor Chris Gregoire on Wednesday signed new restrictions on payday lenders into law. The new laws address what type of payday loan collection efforts can be used and how often and in what manner borrowers can  be contacted.

The rules

Washington law now says payday lenders may only contact customers regarding collection three times per week. Payday loan lenders are forbidden to visit a borrower’s home or place of work unless invited. Lenders must also keep a communication log in which all collection efforts are recorded.

Thou shalt not lie

The law also says payday lenders cannot threaten to take legal action which they can’t actually take. They also cannot imply any sort of affiliation with government agencies. For a full list of new laws, check out this story.

The new restrictions, of course, followed a lawsuit.

Meanwhile, in Idaho

In Washington’s neighboring state, Idaho, the Senate passed a bill regarding payday loans today.  The law, if passed, will require online payday loan companies to be licensed in order to lend to Idaho residents.

The Idaho bill now goes to the Idaho House of Representatives.

Kentucky joins in the fun

Governor Steve Beshear of  Kentucky signed new regulations on payday lenders into law Wednesday. The law now mandates the creation of a statewide database that tracks all payday loan amounts, dates and borrowers.

The database will ensure that requirements regarding the amount and number of loans a single borrower can have at one time. Borrowers now  may not have more than two outstanding payday loans and can’t take out more than $500 in payday loans at once.

Another cap

The bill also says that no new payday loan companies can open in Kentucky for the next 10 years. This provision intends to limit the number of payday lenders in the state. However, despite the governor’s signature, Beshear doubts the legality of this law.

“I question the constitutionality of this provision and believe it may be subject to a legal challenge,” Beshear said.

Sarah Wire of Washington State’s The Olympian newspaper reports that lawmakers in Idaho will consider two bills that should compel cash advance lenders via incentives to make sure they’re licensed before lending to Idaho residents.

These bills would invalidate unlicensed loans and allow Idaho’s Department of Finance to issue cease and desist orders and sue unlicensed lenders. The primary targets of these bills, according to Wire, are those Internet lending companies who don’t happen to have a license.

Having a license is reasonable

The Idaho House bill would “require payday lenders to give consumers a list of credit and debt counseling services and would create an optional payment plan for borrowers who can’t pay off the loan,” writes Wire.

Republican Sen. Shawn Keough told the Associated Press that “online payday lenders who cater to Idaho borrowers should adhere to the same consumer protection laws as payday lenders who operate actual stores in the state.”

But Idaho’s true motivation becomes clear

Democratic Rep. Grant Burgoyne wants to cap cash advance interest charged to borrowers. Democratic Sen. Elliot Werk wishes to “add more regulation to payday loans.” People like these buy into the “debt trap” fallacy perpetuated by the Center For Responsible Lending. However, multiple studies have shown that not only are rate caps and other heavy restrictions upon cash advance loans unnecessary, but they are harmful to the population who need help to absorb the financial shocks that emergencies can cause.

What I’d like to see are politicians who do their own research instead of depending upon the bleating of big-money shadow organizations. I also hold out hope that consumers will take the information lenders give them about terms and costs of cash advance loans and make an informed decision about what is best for them in their situation. The wide majority repay their loans on time, but the small minority who have trouble – even with installment plans – give grist to a lazy media who sees no reason to do actual research. They seize upon the sensational because too many viewers continue to eat it up.

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Montana lawmakers face a long road to payday lending regulation.

Montana legislators are in a dead heat when it comes to payday advance loans regulation.

The House Business and Labor Committee voted 9-9 on a bill that would cap interest rates or fees on payday loans, effectively defeating it.

Still pushing the bill

The bill’s sponsor, Representative Bill Wilson, is trying to move the bill forward. He plans to push the bill out of the committee and to the House floor for debate. In order to pass in the house, the bill will need 60 votes.

Banking on changes

The original bill would have capped interest rates on payday advance loans at 36 percent. An amended version of the bill would instead cap the fees on payday loans and title loans at 10 percent of the value of the loan. The committee’s vote on this amendment also ended in a tie. Wilson plans to present the amended version of the bill to the House.

Up for debate

Wilson says the fee cap is a fair compromise that would be less harmful to payday lenders while adding protections for consumers.

However, “Rep. Mike Milburn, R-Cascade, said the legislation appeared to be intended to shut down the payday and title lending industry in Montana,” according to the Great Falls Tribune. Other opponents of the measure said the amended version of the bill would require a full debate.

Meanwhile, in Idaho

In neighboring state Idaho, the Senate has crafted a bill that would amend the state’s current lending laws.

If the bill passes, financial organizations must be licensed in order to deposit a consumer’s check or withdraw funds electronically from a consumer’s account. Only supervised financial organizations could collect the principal loan, interest or any fees or charges.

This amendment would not affect business in the payday advance loans industry much; it would simply require that lenders be licensed and registered with the state.

Related articles

• Canadian Payday Loan Association Believes Half of Ontario Lenders Will Have to Tighten Belts Under Proposed Rate Cap (newswire.ca)