Consumer Credit Bill Gets Amended, Rolls Back Some Loan Interest Rates

A Senate committee revamped a bill that caps interest rates on many types of consumer credit after pushback from advocates and several lawmakers. However, with the changes, some committee members still feel the bill doesn’t go far enough.

The original language called for interest rates on all loans to be capped at 36 percent – that’s an increase for some loans.

During testimony prior to the amendments, advocates said the proposed rate structure would further discriminate against many communities targeted by payday lenders. Erin Macey, with the Institute for Working Families, pointed to the consequences in other states of increasing the interest rate on certain loans.

“Of those states that have that lower cap for those large loans, we are middle of the pack. Middle of the pack is 25 percent,” says Macey. “I believe Ohio is now 25 percent, Kentucky is 24, Michigan is 26, Illinois is our only neighbor at 36 percent and Illinois has a much higher bankruptcy rate than we do here in Indiana.”

After discussion, committee members voted to keep the current state code’s three-tier interest rate system and blended rate option.

Sen. Andy Zay (R-Huntington) has worked to expand lending options. He says the bill targets what he calls successful lenders in the state.

“I’m not sure we’re moving the needle far enough with this,” says Zay. “It’s time to put this thing to bed and come up with policy that supports our lenders in our state.”

The bill passed out of committee with a vote of 7 to 2. It now heads back to the Senate floor.

Contact Samantha at shorton@wfyi.org or follow her on Twitter at @SamHorton5.