Washington Payday Loan Laws

This is an interesting concept: if both sides of proposed payday loan legislation hate it, perhaps it deserves a second look.

The state of Washington, like many other states, has payday loan legislation introduces every year. Rarely does it go anywhere. Payday loan proponents typically want zero controls placed on their product offerings and proponents of payday loan legislation want the industry driven out of business. So, usually the bills go nowhere.

Washington state Representative Sharon Nelson (D-Maury Island) has introduced payday loan legislation this session that both sides find disgusting! Is this what it takes to get payday loan reform bills passed?

In essence, the proposed payday loan bill would require:

  • Payday lenders would be required to establish a statewide database to track all borrowers
  • Payday lenders would be required to establish a statewide database to track their incomes
  • Payday lenders would be required to establish a statewide database to track how many loans they have outstanding.

In her past life, Rep.Nelson created loan packages for Bank of America. Her bill, she says, “Recognizes that for some folks, payday lending works, and it also recognizes that for other folks it does not work and we need to establish a program to help them get out of debt.”

Interest-rate caps have resulted in the industry picking up stakes and leaving. Consumers are then forced to go to the Internet, call centers, or drive across state lines to get a payday loan.

Nelson told the Seattle News that leaders of various Latino organizations state payday lenders provide much-needed services. Ligia Velasquez, one of the planners of Hispanic Legislative Day and a board member at the Statewide Poverty Action Network, says the cheap check-cashing and wire transfers offered by payday lenders are valuable to many Latinos. Cristobal Guillen, president of the Association of Washington State Hispanic Chambers of Commerce, testified at a Feb. 10 House hearing on Nelson’s bill that payday lenders are some people’s only source of credit.

Nelson says her bill focuses on creating a balance between shutting down payday loan businesses and protecting consumers.

Specifically, Rep. Nelson’s bill would:

  • First, it would limit to eight the number of loans a person can take out during any calendar year.
  • Second, it would set a maximum amount that customers could borrow at any one time: 30 percent of their monthly income or $700.
  • Third, payday lenders would be required to offer a payment-plan option without additional fees to borrowers, giving them up to 90 days to pay debts up to $400, and 180 days for anything larger. Currently, the law requires the installment-plan option after four loans.Borrowers also wouldn’t be able to take out another loan while on an installment plan.
  • Finally, payday lenders would be required to establish a statewide database to track all borrowers: their incomes, how many loans they have outstanding, and whether any are on installment plans.

Dennis Bassford, CEO of Moneytree, wondered why banks and other retailers shouldn’t have to create statewide databases for credit-card holders, who’ve also been known to get in too deep.

On the other side of the proposed bill is Rep. Appleton, one of 10 House representatives who voted against the measure. She objects to allowing eight loans a year. Additionally, she wants a mandatory 30-day gap between loans, as well as a 36% interest-rate cap.

Ultimately, payday loan industry opponents are supporting the bill in the Senate, including the Washington Community Action Network and King County Councilmember Larry Gossett. A Gossett representative read a letter to the committee on Monday offering support for the bill. The committee is expected to vote on the bill next Monday.

Comments ( 3 )
  • Really? says:

    These are loans not charity. The amount of intrest charged as long as it is clear should be unlimited. Most private folks would expect to get 100.00 on a 700.00 personal loan to a family member or friend for a couple weeks. Most of these loans a far less secure than that. A comparision to a long term loan v.s. this short term debt is as relevant as a comparrison in fuel mileage of a Prius and a Peterbuilt.


  • rose says:

    gr8 news….such developments would help us to access money more easily 🙂

  • Honest John says:

    This would be a good development. Protect the consumer and let payday loan stores stay in business. This makes sense!

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