BATON ROUGE — Payday lenders currently charge interest rates 10 times higher than felony loansharking laws allow.
When doing research on ways to reform payday lending laws in Louisiana, leaders with Together Louisiana made a striking discovery. Louisiana already has on its books a law to protect consumers from the predatory practices of payday lenders, who charge annual interest rates and fees of up to 700 percent.
Louisiana's "Loansharking Law" (Revised Statute 14.511) says that lending at interest rates above 45% per year or the equivalent rate for a longer or shorter period counts as the crime of loansharking.
Loansharking is a felony in Louisiana, punishable by fines of up to $10,000 and/or prison terms of one to five years, "with or without hard labor."
So how do payday lenders get away with charging an interest rate of 16.75 percent for a two-week period, or 436 percent on an annualized basis -- nearly 10 times higher than the rate defined as a felony?
In 1999, the legislature specifically exempted payday lenders from Louisiana's loansharking law.
On Tuesday, March 25th, at 11:30 a.m., citizens and legislators held a press conference on the front steps of the State Capitol to call for removing the payday lending exemption from the loansharking law.
Senator Ben Nevers sponsors that legislation, which is a companion to a bi-partisan payday lending reform bill, Senate Bill 84, sponsored by Senators Nevers, Robert Adley and Sharon Weston Broome.
SB 84 would cap annual interest rates and fees for payday lending at 36% percent.
Legislators were joined at the news conference with leaders from Together Louisiana, the Louisiana Budget Project, AARP Louisiana and other organizations that support payday-lending reform.
"It is mind-boggling that our laws consider lending at 45 percent a felony, subject to hard time, but then turnaround and make it perfectly legal for payday lenders to charge ten times that amount," said Dianne Hanley, a leader with Together Louisiana.
"Our abusive payday lending system is being enabled by our legislature. It's time that our legislature take action to stop the abuse that's harming thousands of Louisiana families every year."