Advocates of payday lending regulation are looking to another strategy now that Louisiana lawmakers have squashed efforts to cap the loans' annual interest rates. A bill by Sen. Ben Nevers (D-Bogalusa) would limit borrowers to 10 payday loans per year. Nevers hopes his measure will gather support as lawmakers seek a compromise on payday lending. It originally called for a 36 percent ceiling on annual interest rates, but the Senate judiciary committee rewrote the legislation to instead restrict the number of loans borrowers could take out in a year to 10.
Rather than limiting the number of loans borrowed each year, organizations seeking tougher restrictions on the loans would prefer a fee limit. They see Nevers’ bill as a second-rate solution, although they intend to support it. Andrew Muhl, director of advocacy for AARP Louisiana, said his organization will keep promoting an interest rate cap.
An industry-backed bill by Rep. Erich Ponti (R-Baton Rouge) would give borrowers an installment payment-plan option that has no late fees, but it avoids adding new restrictions on fees. Ponti plans to oppose Nevers’ bill, saying that a cap on the number of loans does not help borrowers avoid the late charges that contribute to the debt cycle. Supporters of an interest rate cap, however, say Ponti’s measure does not speak to payday loans' real problem: high interest rates that cause people to keep taking out new loans.