The Seattle City Council, Mayor Ed Murray and City Attorney Pete Holmes are opposing a proposal backed by Washington’s payday lenders that would loosen a state law restricting high-cost loans marketed to poor families.
Murray, Holmes and the council’s nine members each signed a letter Monday urging Seattle’s state lawmakers to reject the legislation, which would eliminate traditional two-week payday loans and replace them with “installment loans” of up to $1,000 that would stretch repayments out for up to a year. The proposal is contained in matching state House and Senate bills.
The bills take aim at a 5-year-old law that limits payday loans to $700 and restricts borrowing in other ways. Since the law went into effect, payday lenders in Washington have lost three-quarters their business.
“The payday lending reforms passed in 2009 and implemented in 2010 are protecting low-income consumers from a cycle of high-cost debt,” the letter says. “Unfortunately, (House Bill 1922 and Senate Bill 5899) would strip away these protections and create a high-cost lending product and put borrowers at high risk for repeat borrowing.”
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“Many (borrowers) suffer financial setbacks after they obtain credit and have difficulty repaying their financial obligations,” the letter goes on to say. “The high cost and structure of the proposed small installment loan would only make these financial challenges worse. The bills before you create a new debt trap.”
The lending industry, led by MoneyTree, has been lobbying lawmakers on both sides of the aisle, and the proposal has passed committees in both chambers with some bipartisan support. Gov. Inslee and state Attorney General Bob Ferguson are against the bills, however.