Cash Loans Act Passes In Oklahoma, Cuts Interest Rates in Half
A bill capping interest rates for cash loans was recently introduced in the Oklahoma legislature according to a report posted at Reddirtreport.com. Unlike many bills limiting interest rates, this bill would cap interest rates at 17-percent interest per month instead of 36 percent per year. House Bill 1913 was submitted by Rep. Chris Kannady (R-Oklahoma City) who made the case that federal regulations shouldn’t control business within the states. Kannady’s bill would cut the interest rates of short-term cash loans while allowing enough leeway for lenders to make a reasonable profit.
The interest rates for short-term cash loans have caused political infighting as state legislatures move to regulate the industry. The Consumer Financial Protection Bureau, which was empowered by the Dodd-Frank Act to regulate the financial industry, may be changed or eliminated due to presidential opposition. Many states are therefore seeking regulatory compromises or trying to implement the CFPB’s recommendations despite the opposition of President Trump who favors deregulation. The Oklahoma bill would limit the worst predatory lending while allowing lenders to offer cash loans.
Kannady believes that compromise is the best option for dealing with the controversy over interest rate limits. Kannady commented on people who turn to short-term cash loans, “These people have no other alternatives, well, I take that back they do,” Kannady said. “They can sell drugs, they can get into prostitution, and they can get into all other activities, sell off all their assets to take care of their family. Do we want to ignore the situation as it stands or do we want to lead?”
A Bill Regulating Oklahoma Cash Loans Cuts Interest Rates
A similar bill to cap interest rates for cash loans was proposed in 2016, but the Southern Baptist Convention and the National Association of Evangelicals opposed it. Evangelicals oppose charging interest rates as un-Christian, and conservatives have held this view for more than 1,000 years. However, Oklahoma has more payday loan companies per person than any other state. The new bill would protect borrowers from some of the extreme interest rates, but many payday lenders could continue to offer loans at the reduced rates. The House version of the bill passed 59 to 31 and now moves to the Senate.
Oklahoma already enjoys some of the lowest interest rates for payday-type loans according to Ustatesloans.org. The details include:
- The maximum APR is 390 percent,
- The highest-value loan is limited to $500.
- Loans under $300 are limited to 15-percent interest.
- Loans over $300 are limited to 10-percent interest.
- Term limits for these loans range from 12 days to 45 days.
The proposed bill would cut interest rates in half on an annual basis while allowing higher interest for short-term loans.
Cash Loans Online Offer Lifelines to Many Consumers
Despite criticism of interest rates and possible debt traps, cash loans online offer lifelines to many borrowers and enjoy high approval rates from the people who apply for them. In Oklahoma, state legislators have introduced many bills to cap interest rates, raise loan limits and limit the number of loans a borrower can get in a 12-month period. SB 112 would increase cash loans online from $500 to $1,500, but the bill has received outraged opposition.
According to a report at Nondoc.com, The Voices Organized In Civic Engagement, or VOICE, group opposes SB 112 because the interest due at the end of the first month for the maximum loan amount, according to VOICE, would total $255. A similar bill was introduced in 2016 that would allow cash loans online of up to $3,000. That bill would have allowed 20-percent interest per month for cash loans for bad credit.
State Actions Could Replace Federal Regulation
The Constitution empowers states to manage banking and lending within their borders. States are taking the lead in regulating short-term cash loans online. According to Usnews.com, 30 states have banned auto title loans, and 12 have capped interest rates at 36 percent, which is what the CFPB mandated. However, Republican support of deregulation continues to muddy the waters, and many respected leaders support cash loans online as lifelines for people who face service interruptions.
An article posted at Huffingtonpost.com written by Rep. Alcee L. Hastings revealed that the legislator started his law firm with a short-term loan. Hastings suggests that Florida laws would be an excellent blueprint for other states to use when regulating short-term loans.
Hastings is quoted in the article as saying that some people are harmed by high interest rates but that states can prevent the most egregious predatory lending. The Florida law, H.R. 4018, limits payday loans to $500 and interest rates to 10 percent. Borrowers can’t take out additional loans if previous loan balances are still outstanding. Consumers also enjoy a 60-day grace period when they can’t repay their loans as agreed.
Hastings equates too many regulations with threatening the ability of Americans to manage emergencies such as preventing the electricity or water from being turned off or being unable to pay the rent or car payment. Disenfranchised people can’t go to big banks or even community banks for a short-term loan. Accepting the CFPB’s recommendations would put 70 percent of all short-term lenders out of business and leave many people without borrowing options.
Cash Loans for Bad Credit Generate a Flurry of State Legislation
Cash loans for bad credit continue to generate political controversy, and many state legislatures are moving to regulate cash loans in the wake of presidential opposition to the CFPB, the agency charged with regulating the financial industry. The CFPB has targeted the lenders of cash loans for bad credit with burdensome new regulations that many critics of the agency feel go too far and exceed its legislative mandate. President Trump has vowed to limit the CFPB’s power or abolish the agency, so many state legislatures are scrambling to set state limits for cash loans for bad credit.
New Mexico is one such state that’s trying to limit interest rates on cash loans to 36-percent APR according to a report posted at Lcsun-news.com. The state senate approved the 36-percent limit while the House has already passed legislation that limits interest to 175 percent for bad credit cash loans. State Senator Craig Brandt, a Republican from Rio Rancho, equated the limits to “limiting freedom.” Many Republicans favor deregulation and prefer to let interest rates be set by market forces.
The debate over interest rates for cash loans generates lots of controversy. In Oklahoma, Senator David Holt, who doesn’t necessarily support payday-type short-term loans, believes in free enterprise. Senator Holt commented in an article posted at Kfor.com, “If it’s a really bad financial product for people, I would like to think they won’t pursue it. And we[,] as government[,] don’t have to tell them that. That they will just go elsewhere.” You can find out more about new state regulations of cash loans at the Personal Money Store.