Delaware Legislators Tackling Payday Loan Companies

Helene Keeley

You can add Delaware to the list of states looking to take aim at the payday loan industry.

According to the Delaware State News newspaper, several lawmakers will introduce new legislation in January that would restrict or curb payday loan businesses operating within the state of Delaware.

The proposed legislation was put forward on the very last day of the state session this year. This means that not only will public officials be required to debate the legislation next year, but it will also serve as a warning shot to the unscrupulous payday loan establishments.

One of the lawmakers is Wilmington Democratic State Representative Helene Keeley, who states that there needs to be a cap on interest rates. She pegs the number at 100 percent for short-term, small-dollar loans.

Today, critics say, payday loans in Delaware come with exuberant rates of interest that hurt low-income consumers who are trying to get by. The interest rates and other charges can cause some borrowers to roll over their loans because they can’t afford the previous amount.

Kelley attempted to reassure the industry and its proponents that her legislation isn’t trying to take them down or prohibit them from operating across The Diamond State. Instead, she says, she wants in place a number of consumer protection laws that ensure people do not enter a state of perpetual debt.

Sponsors of the bill are hoping that they can come to a consensus over the next six months that will create an environment of fairness and a “more reasonable” marketplace for impoverished families that sometimes rely on payday loans.

Proponents of the payday loan industry say that it’s the bad lenders that ruin it for the rest of the industry that tries to be honest. Pike Creek Republican State Representative Michael Ramone believes that you can’t paint everyone with the same brush, but noted that laws may be needed.

“There is also a point at which people are absolutely desperate and they’ll do whatever they can obtain money, and unfortunately some of these predatory lenders are taking advantage of that and making it a devastating environment for these people,” Ramone said.

“That’s not the way the system is supposed to work. There’s a lot of room for great online payday loans for bad credit to work within the parameters of reasonableness and help people and then there’s the ones trying to take advantage of people.”

This isn’t the first time that the state has tried to rein in the payday loan industry. In 2012, the state passed a law that would limit the number of payday loans a borrower can take out. The legislation at the time limited it to five over the course of one year.

The Consumer Financial Protection Bureau (CFPB) has been trying to incorporate this into its proposed federal regulatory framework. Other states have also emulated the same kind of thing. Eighteen states have outright prohibited payday loans altogether.

Payday lending costs surpassed $2.6 billion in Delaware, according to Responsible Lending. Nationwide, the payday loan industry is valued at $45 billion as millions of Americans take out a payday loan every year.

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