Payday loan providers are asking for more options and extended repayments. They argue it will give borrowers more flexibility but opponents say it’s a trap for low-income borrowers.
Those in opposition of House Bill 857 believe an increase in payday loan amounts and repayment installments wouldn’t be beneficial for low income citizens could become harder for the loans to be repaid. Reverend Rachel Gunter Shapard calls the proposal “exploitation”.
“We cannot exploit the poor simply because they’re poor, it must stop," Shapard says, "People do take loan after loan as was mentioned earlier, what is happening is that because it’s taken out of their bank account initially then they immediately have to take out another loan and another loan in succession, one after another.”
Or, in some cases, borrowers have taken multiple loans at the same time. But sponsor Rep. James Grant (R-Tampa) says consumers would not be able to take out an additional loan until their payments are completed.
“In the state of Florida we have a database, that database insures that only one payday loan at a time can be opened, as well as numerous interests delays, where the interest would be stalled if somebody got to a place where they could not pay," Grant says.
And payday lender Advance America’s Carol Stewart argues people cannot layer their loans through these services because a database that keeps the records of existing loan payments they have not received.
“The current law in this proposed legislation have three important things that other states don’t offer when you hear that criticism," Stewart says, "One is that you have an industry wide cap of one loan at a time in the state and you have that database to back that up.”
Supporters say payday loans are beneficial for their communities. Pastor Clethan Sutton says he was initially opposed to Amscot loan provider until he realized how many of his church members use it.
“My members, they use it if they come up short. Might get a hundred dollars, couple of hundred dollars to pay whatever bill to keep from going into default to ruin their credit. So, I’ve seen it work, I’ve read through the literature about the payday loans and what not, and Amscot is the model," Sutton says.
Numerous studies on payday loans show higher rates of default than traditional ones. The Texas Office of the Consumer Credit Commissioner in 2014 found the default rate on payday installment loans was at 53 percent. Another study by the Center for Responsible Lending in 2015 found the defaults at 44 percent.