Drive to limit interest on 'payday' loans falls short

HELENA – House lawmakers today refused to revive a bill that would have put a cap on the interest rates charged to consumers who take out 'payday' loans. The attempt failed by a vote of 51-49.

House Bill 396, sponsored by Rep. Bill Wilson, D-Great Falls, would limit interest rates to a 36 percent on both payday and auto loans.

The bill was tabled in committee on a party-line vote, 9-9. Wilson said it should be debated on the floor because Montanans going further into debt because of exorbitant interest rates, which he said can exceed 400 percent annually.

“These people are trapped,” Wilson said. “They are paying interest rates that in my opinion would make (TV mobster) Tony Soprano embarrassed.”

Rep. Shannon Augare, D-Browning, said payday loan businesses need more regulation because they are built on the same kind of greed that put America in the current economic crisis.

But opponents to reviving the bill said putting more regulations on this industry will only hurt its employees and the people who use the services.

“The purpose of this bill is not to cap interest rates,” Rep. Mike Milburn, R-Cascade. “It’s to put people out of business.” Milburn added that forcing these businesses to close will force the people who work there out of a job.

Rep. Edward Butcher, R-Winifred, said payday loans are often the only opportunity some low-income people have to borrow money for emergencies. He said paying $10 interest on a $50 loan is cheap compared to a $30 charge for bouncing a check at a bank.

“Until you’re going to go ahead and require banks to loan money to people that have no assets, you better not take away this one avenue,” Butcher said. “What do you want them to do, go sell their body on the street to get the money?”

HB 396 was originally tabled in the House Business and Labor Committee by a 9-9 party-line vote. It would need 60 votes from House representatives to force it out of committee deadlock and onto the House floor.

Similar efforts to revive payday loan interest bills in the Senate failed as well.

- by CNS correspondent Molly Priddy