House panel mulls reviving payday loans

“Usury is in the eye of the beholder,” said John Hunt, R-Rindge, chairman of the House Commerce Committee, as his panel on Tuesday considered allowing high-interest payday loans in New Hampshire once again.House Bill 160 refers to them as “installment loans,” but they would be very similar to the loans offered by the payday lenders that fled New Hampshire after the state capped interest rates at 36 percent.Payday loans are different from title loans, for which the borrower gives the lender title to his or her car in exchange for a short-term loan. If the loan isn’t paid back in a month, the borrower risks losing the car, and often rolls the loan over at a high interest rate. Lawmakers voted to bring those loans back in the last session, but Gov. John Lynch vetoed the bill. The House overrode his veto, and the fate of that industry rests in the Senate, which won’t take up vetoes until next year.In the case of installment loans, the borrower promises to sign over his or her next paycheck, at even higher interest rates than a title loan. HB 160 has certain protections against loan rollovers, such as a cooling-off period of a couple of days. That, however, is only for those who pay off their loan early. No such protection exists for those who don’t, pointed out Sarah Mattson, a New Hampshire Legal Assistance attorney who has led the fight to outlaw the industry.”You pay off your loan with your paycheck. You don’t have money for rent. And you get a new one while you are in the store,” she said. “There is nothing to prevent back-to-back loans.”Alex Koutroubas, a lobbyist for Advance America, a national payday lender, acknowledged that Mattson was right.Still, said Rep. Fred Rice, R-Hampton “you can’t legislate against stupidity,” he said. “If the interest rates are too high, don’t go there. It boils down to free enterprise.”Banks are starting to go there, said Jenn Coffey, R-Andover who chairs the committee’s banking subcommittee. Wells Fargo is starting to offer high-interest short-term loans that would violate state law. But the state Banking Department can’t go after the bank because they are banks and are federally chartered. Besides, said Hunt, Wells Fargo doesn’t even have any branches in New Hampshire.That doesn’t means that such lending doesn’t go on here, via the Internet. Indeed, the Banking Department has received so many complaints against unlicensed lending that it assigned its new attorney to just handle that. In other words, the department spends as much time and energy chasing unlicensed lenders as it does regulating the licensed ones.Hunt asked for more statistics from the department before the committee makes a decision on HB 160. Among his questions: Are there more complaints about pay day lenders now that they aren’t legal? and wouldn’t it make sense to bring them under some sort of regulation?The department is scheduled to return to the committee next week, when then panel hopes to make its decision. But at this point, it looks as if the committee is leaning toward a rebirth of payday lending. — BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW