Indiana Republicans have passed a bill that allows payday lenders to offer small loans at rates up to 222 percent, marking a big win for the industry which lobbied state officials heavily for the change.
Payday loans would be exempt from the state's loansharking laws, which kick in at rates above 72 percent.
The House on Wednesday narrowly passed House Bill 1319, which would allow storefront lenders to offer three to 12-month loans of $605 to $1,500 with annual percentage rates up to 222 percent.
Under current Indiana law, rates of more than 72 percent are considered felony loansharking. Payday lenders can offer higher rates, but only for smaller loans.
Both the payday loan industry and GOP officials claim the move is meant to help fill a market niche and assist those with bad credit in raising their scores, but those opposed believe it benefits lenders at the expense of vulnerable borrowers.
Opponents have managed to kill bills in the past that would have created additional high-APR loan options. But this year, opponents say it seems like there is more lobbying power from the payday loan industry.
It feels like this year it’s like an army," said Erin Macey, a policy analyst for the Indiana Institute for Working Families. "Anytime we push out one narrative, they’ve found another one."
Indiana's new law tracks along with Trump administration changes to Obama-era guidance on keeping predatory payday lending in check. In fact, it was fear of that guidance which inspired payday lenders to lobby hard for state-level changes:
Industry representatives argue there is a greater need this year for a new type of loan because of new Consumer Financial Protection Bureau rules created during the Obama administration.
"The net efect of this is that payday loans will become obsolete in most part when it becomes effective next summer," said Sabra Northam, representing the Community Financial Services Agency. "The impact of this rule is that the consumers that our association serves today will have to turn to the unregulated market."
But Indiana has now protected its lenders regardless of changes that may or may not occur at the federal level, and state Democrats are not pleased:
"I’m all for helping people, but this bill is helping no one but the companies that are going to benefit from these high interest rate," said Rep. Robin Shackleford, D-Indianapolis.