With household debt at historic highs, oppositions say now isn't the time to expand these types of high interest loans.
(Indianapolis, Ind.) - A coalition is urging Indiana lawmakers to stop a bill that would significantly expand high interest loans in the state.
Senate Bill 613 would allow loans with interest rates above 72 percent, which is currently considered felony loan sharking.
Indiana veterans groups, faith organizations and social service agencies say the bill would open the door to predatory lending practices.
But supporters maintain it fills a gap for borrowers, between traditional bank or credit union loans and payday lending.
Erin Macey, a senior policy analyst with the Indiana Institute for Working Families, says the only winners would be the payday lenders.
"The rates and fees allowed in this bill will allow lenders to profit, even when borrowers default," she points out. "What we've seen from high cost loans in other states is that they have very high default rates. So, they're very damaging for borrowers, but lenders are able to be successful."
Macey's group says the bill could allow small dollar loans that charge up to 99 percent interest each year. She notes it also would increase the allowable costs not only for payday lenders, but all kinds of consumer loans, including car loans.
The measure has passed the Senate and is now in the House Committee on Financial Institutions.
Macey says with household debt at historic highs, now isn't the time to expand these types of high interest loans.
"If we want to talk about solutions that work for working families, we need to really assess the state of credit as it is right now, and be talking about how to help families work their way out of the debts they're already struggling with," she stresses.
The groups opposed to this legislation supported another bill that would have capped interest rates at 36 percent. That proposal died in the Senate in February.