ANNAPOLIS – Single, Baltimore mom Dayna Robertson is waiting for a knockout punch.
Round two of a fight against pay day loans – small, short-term loans with triple-digit interest rates – finished this week with a House hearing at which Robertson testified.
Now she and others are waiting to see if the Maryland House and Senate will deliver a powerful punch to the industry that cost her and thousands of others statewide hundreds of dollars in interest on the small loans. It’s the same position foes of the loans were in last year, when they thought the General Assembly had delivered a deathblow to the industry.
B.U.I.L.D., the faith-based organization Robertson belongs to, started off strong this session after one delegate withdrew his sponsorship of a bill that would work to keep the pay day loan industry alive.
But there’s still no telling what could happen: the other sponsor, Delegate John F. Wood Jr., D-St. Mary’s, is chairman of the House Commerce and Government Matters Committee, the panel in charge of voting on the measure.
Last year, B.U.I.L.D was integral in getting the Maryland General Assembly to pass a law limiting interest rates on small loans to 33 percent.
But lenders saw a loophole. Those with ties to federally chartered banks may charge more because federal regulations supersede state law.
Wood’s bill is aimed at driving these unregulated pay day lenders out of business by giving borrowers better interest rate choices. But the problem with this measure is that it carves out an exception to the usury laws for pay day lenders, allowing them to charge rates as high as 390 percent.
That’s still better – often half – of what some pay day lenders tied to federally chartered banks now charge.
Yet, it’s still more than 10 times the interest rate limit organizations like B.U.I.L.D. fought hard to pass last year.
“Why should I be subject to high interest rates?” Robertson, who testified in both chambers, asked the Senate Budget and Taxation Committee last week. “You don’t have to pay these rates – it’s just because I’m lower on the totem pole or what some people call poor.”
Marvin Lee of B.U.I.L.D. is upset the industry had the audacity to vie for this legislation again.
“All they did was change some provisions, but the rate is still just as high,” said Lee. “Unless it’s 33 percent, this is scandalous and sinful – and it’s still predatory lending.”
While Lee said he believes this measure would allow the greedy to prey on the needy, pay day loan advocates testified there is a strong need for this financial service plus, it’s a lot better than what already exists.
“If this bill goes into the code – and I’m not sure it will, it might be a bad law but it’s better than what we have now, ” said Sen. Thomas Bromwell, D- Baltimore County.
“People are already going outside of the regulated areas. They’re going to the man down the street that’s charging them 30 percent [a week].”
But instead of choosing the lesser of two evils, the Maryland Commissioner of Financial Regulations wants legislators to give an unfavorable report and look at a more comprehensive way to deal with such loans.
“How are [borrowers] going to be able to pay that back with a hole in their budget two Fridays from now?” asked Mary Louise Preis, the financial regulations commissioner, who strongly opposes the bill. “It just carves a huge exception out of our loan law.”
Thirty-five other states have similar measures, according to the Community Financial Services Association, which successfully argued the loans are “consumer friendly” because they have no rollover rates or late fees.
“Exploitive,” however, is the word advocates for the poor like Deborah Povich of the Center for Poverty Solutions use. She and fellow advocates say it’s “a trap” because these pay day lenders make huge profits from loaning money to poor, desperate people who live paycheck to paycheck and won’t be able to pay back the loans.
There are 47 pay day loan institutions in the state, located primarily in low-income areas, according to Povich.
Still pay day loan proponents say the issue isn’t about going after the desperate.
“We’re not talking about preying upon poor people. That really upsets me when I hear that,” said Matthew Thomas, a Prince George’s County businessman who testified before the Senate. “We’re talking about a regulated industry in this state.”