Legislators attempt, yet again, to curb payday loan industry

Nevada lawmakers introduced legislation Wednesday to cap interest for payday loans at an annual percentage rate of 36 percent, a rate cap that national advocates contend has all but eliminated exorbitant and abusive lending practices in several other states.

Assemblywomen Heidi Swank and Lesley Cohen are the primary sponsors of Assembly Bill 118, the latest attempt to rein in the lending industry. Annual percentage interest rates for loans in Nevada are among the nation’s highest, and can be upwards of 600 percent. Another half-dozen members of the Assembly, all Democrats, have signed on as co-sponsors.

Swank, who has unsuccessfully introduced bills to rein in the industry before, said the proposed interest rate change is the same as the Military Lending Act, which caps loans for active-duty military.

“Thirty-six percent balances both the risk worn by the business, but also doesn’t overcharge (higher-risk borrowers) and create that cycle of poverty that happens if people get stuck in these payday loans,” Swank said. “We’ll see where we get with the number, but I think 36 is where we start and we have conversations.”

Groups such as the Progressive Leadership Alliance of Nevada have been organizing against the payday loan industry for years.

“There are more payday lenders in Nevada than McDonalds and Starbucks combined,” said Laura Martin, PLAN’s executive director, during the Progressive State of the State.  “These predatory lenders charge an average of 652 percent for a loan. It is outrageous to think that just because someone cannot obtain a loan or line of credit from a bank, that they should be subjected to such an outrageous scam.”

Several states have capped the industry’s interest rates legislatively, while a few others have done it through ballot measures. Swank prefers the legislative approach. “I’m not a huge fan of using ballot measures all the time,” she added. “I think they need to be used very carefully.”

Other failed legislative attempts to address the industry in Nevada over the years have included placing limits on the number of payday loans borrower could receive.

Swank added that during the interim she was able to reorganize the various types of payday loans to separate them out by type, such as a title lender or installment loan. “It allows us to be much more strategic as to how we legislate the different sectors,” she said. “It’s a model common in other states.”

Though Democrats control the governor’s office as well as strong majorities in both houses of the Legislature, if the past is any indication, opposition from the industry and lawmakers sympathetic to it will be stiff. And last month, Gov. Steve Sisolak indicated his own reticence at taking too hard a line on the industry, echoing the industry’s argument that it provides a vital service.

“We are only day three into the session,” Swank said. “We have a long way to go before (legislation) makes it to the governor’s office.”

Attempts to reach payday loan industry lobbyists were unsuccessful Wednesday.