The AARP is preparing to propose legislation that would limit the long-term interest rates for “payday” loans in Louisiana, after a survey found support for this effort among 60 percent of voting-age state residents.
“We want legislation to cap the interest rates at 36 percent,” said Andrew Muhl, director of advocacy for AARP Louisiana. “That’s the cap the federal government put on payday loans for active military personnel. It brings Louisiana in accordance with federal law for active military.”
The annual percentage rate (APR) for the average payday loan is 782 percent in Louisiana, according to Muhl. Payday lenders argue that Louisiana interest rates already are capped, since interest rates on a defaulted loan cannot exceed 36 percent. By adding lending and documentation fees, however, the annual percentage rate can climb much higher. If a customer borrows $100 and pays a $15 fee, adding other loans, fees, and increased interest over a year, the annual percentage rate could reach 700 percent APR. In a survey of 600 Louisiana residents, 58 percent said they would be more likely to vote for a candidate that supports capping payday lending.