Rein in payday loans, predatory lenders

Loans due in full next payday. No installments, no exceptions. What began as a one-time small dollar loan to address a financial shortfall becomes a financial emergency every two weeks. That's what payday loan borrowers in Iowa face all too often.

Iowa's payday lenders siphon over $30 million in fees annually by charging interest rates of 268 percent APR to Iowans in desperate situations.

That's why the introduction of House Study Bill (HSB) 138 in the House Commerce committee of the Iowa Legislature was a refreshing sight. Sadly, in order to pass out of committee and survive the March 6, 'funnel” deadline, the bill was radically amended (with help from the payday loan industry). Nineteen of 23 legislators, both Republican and Democrat, voted to keep this bill alive. As this bill heads to the floor of the House for debate, it must be amended to replace the policy reforms HSB 138 contained. These reforms included a payday lender letting a borrower know an extended payback plan is an option, and that borrowers can request more than one in a given year.

As initially drafted, HSB 138 was bipartisan reform to the payday loan industry. It created a realistic expectation of a borrower's ability to repay their loan - without defaulting or repeat borrowing that often lasts years. It did this by allowing a borrower to pay off their loan in installments - or all at once - over 90 days.

Given that over 90 percent of all payday loan borrowers will become repeat borrowers, and the average payday loan borrower in Iowa will take out 12 or more loans in a year, legislation like this is desperately needed. And it wasn't even a new idea.

HSB 138 largely resembled what the payday loan industry calls its 'best practices” for extended payback plans. It was not burdensome regulation, it merely ensured that any bad actors in the industry were no longer left unchecked.

CCI Action Fund members ultimately want a cap on payday loan interest rates at 36 percent APR - the same rate banks abide by. However, we supported this effort as a step forward that treated both people and businesses fairly.

This reform wasn't being called for by a select few. Community action agencies, The Family Leader, Iowa Catholic Conference and many others supported this reform in a House Commerce subcommittee meeting just a few weeks ago. It mirrored nationwide support for straightforward, common-sense reform. Recent polling by Lake Research Partners and Chesapeake Beach Consulting found that majorities of Republicans, Democrats and Independents, alike, strongly favor reform to the payday loan industry.

Nine Iowa cities, including Cedar Rapids and Iowa City, have enacted local zoning ordinances restricting where these businesses can locate. It's time our elected officials embrace and pass common-sense, bipartisan reform to an industry that's been left unchecked.

Anything less than the original intent laid out in HSB 138 - already a compromise for both borrowers and businesses - is unacceptable for Iowans and our Iowa values. It's time our lawmakers, especially Speaker of the House Kraig Paulsen (R - Hiawatha), take bold leadership and make this right.

' Matthew Covington is a predatory lending organizer with Iowa CCI Action Fund, a non-profit, non-partisan grass roots organization. Comments: matthew@iowacci.org