June 16, 2024

New bill would cap interest rates on small payday loans at 36 percent – 95.3 MNC

You may have had to get a small loan in the past. One Indiana politician says lenders are taking advantage of you and your family.

House Bill 1171 would cap interest rates on small payday loans at 36-percent. The bill, authored by Democrat State Rep. Carey Hamilton of Indianapolis, is a response to what Hamilton calls a “debt trap” that preys on Hoosier families living paycheck to paycheck.

“I think any reasonable person would agree that an annual percentage rate of 89-percent on a 500-dollar, six month loan is unreasonable,” said Rep. Hamilton at the Indiana Statehouse Wednesday.

If passed, the bill would not only cap interest rates at 36-percent, but also create a punishment for lenders that violate those terms.

“The 36-percent rate cap comes from a federal rule that you cannot lend to active members of the military above that rate,” Hamilton explained, “that’s for national security reasons to protect our military families. I think that’s a good policy and I think it should extend to all Hoosiers in Indiana.”

Rep. Hamilton, who’s been working with other elected officials on this issue for the last few years, argues this is not just about financial health, but the emotional health of families. She says predatory loans could lead to families losing their car or children being concerned with the financial burdens their family is going through.

Hamilton details a study produced by the Indiana Community Action Poverty Institute in which the organization found that in 2021 alone, borrows spent more 26-million-dollars than they would have if a rate cap was in place.

“26-million-dollars that could be in the pockets of our hard-working Hoosier families, our most vulnerable Hoosiers, veterans and families,” said Hamilton.

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