How Hawai‘i’s payday loans both help and hurt residents who use their services were examined in an informational briefing held at the State Capitol today.
Senator Rosalyn Baker (Dist. 6 – South and West Maui), Chair of the Senate Committee on Commerce, Consumer Protection, and Health, along with members of the House Committee on Consumer Protection and Commerce, heard from the Stephen Levins, head of the DCCA Office of Consumer Protection on the present status of Hawai‘i’s payday lending laws. Hawai‘i and 15 other states have APR rates of approximately 460% or higher.
Nick Bourke, Director of Consumer Finance with The Pew Charitable Trusts, explained that when payday loans were introduced 25 years ago as short term loans, they were created with good intention. Bourke told lawmakers that today the law around payday lending is broken and reform is needed. Several states have made efforts to reform payday lending laws and Bourke shared a survey that found 3 in 4 Americans want payday loans to be more regulated. Bourke suggested elements to make loans safe and fair including making payments affordable, spreading the repayment cost over the life of the loan, give borrowers a reasonable time to repay the loan, and lower the cost of the loans, as well as guard against harmful practices.
Jeff Gilbreath of the nonprofit Hawai‘i Community Lending , shared data gathered on a three-year small dollar loan pilot project. The agency offered loans to 184 qualifying clients at 8 to 16 percent annual interest rates. Gilbreath said the pilot shows how it is possible to loan clients at lower rates and still earn a profit.
Hawai‘i legalized payday lending in 1999 as a way to regulate the check cashing business. Many states have either banned payday loans or capped the loan rates on the industry that is currently worth $30 billion nationally. The purpose of the informational briefing is to gather data that may be used in legislation to improve payday lending laws.