Sometimes, the surest sign that lawmakers have found a reasonable resolution to a seemingly intractable fight is the lukewarm reception coming from both corners of the ring.
So it is with regulation of payday lending. Neither advocates for the poor nor the payday lending industry are thrilled with a promising compromise taking shape.
That’s not surprising, given how far apart the two sides started – and remain – to this day.
Lenders contend these small, short-term advances offered at high interest to people who need money before their next paycheck are already well-regulated. The industry claims that further restrictions will only cut off credit options for responsible borrowers and others who have few alternatives.
Critics charge that payday loans trap people in a cycle of revolving debt and poverty. Given their druthers, they’d ban the industry from the state.
Somewhere in the middle likely lies the truth – and the best public policy. But lawmakers have been slow to force the two sides to the bargaining table.
That appears to be changing. State Rep. Steve Kirby – a Tacoma Democrat whose 29th District has the highest concentration of payday lenders in the state – is helping craft legislation that might come as close to middle ground as Olympia has seen.
The bill in its current form would prevent borrowers from taking out multiple loans from multiple lenders and cap how much cumulative payday loan debt they could carry at one time. To consumers who can’t repay their debts when they come due, it would give easier access to payment plans.
As notable as what the bill does is what it doesn’t do: Put a crimp in lenders’ ability to make money on the original loans. That seems to have been enough to buy the industry’s grudging acceptance.
But payday lending critics led by the Statewide Poverty Action Network are better described as skeptical. They worry that lenders will still pressure borrowers to roll their loans over instead of opting into payment plans.
They’re hoping to include a provision that converts unpaid loans automatically to payment plans. They also are proposing a 30-day waiting period between the time a borrower pays off one loan and is able to take out another.
Neither proposal would do much to hamper the ability of responsible borrowers to use payday loans as they should – as occasional stopgap fixes to temporary cash flow problems. Industry might do well to accept these additional regulations rather than risk pushback from fed-up lawmakers or voters.
If legislative negotiators succeed at crafting a proposal that splits the difference fairly, it will be cause for celebration. Just don’t expect to hear any cheering coming from the payday lenders or their foes.
