At a summer-study session last week, Indiana Rep. Martin Carbaugh declared that he and other lawmakers who have backed adding new forms of predatory lending in the past “aren't heartless” and declared:
“I am interested in protecting those who may get hurt. ... But we need a little more at the table discussion and not just a 'no.' ”
In a sense, the Fort Wayne Republican is right on both counts.
First, it's pointless to question the compassion of lawmakers who want to add new types of high-interest loan options. Take them at their word when they say they believe such loans would help struggling Hoosier families.
Second, the Interim Study Committee on Finances and Insurance, of which Carbaugh is vice chair, needs to endorse legislation on this topic for the 2020 session. But instead of adding new types of predatory loans, the committee should consider putting limits on payday loans.
Exempt from Indiana's loan-shark law, which forbids charging more than 72% annual interest, payday lenders are allowed to charge their customers the equivalent of 391% annual interest. Supporters say such loans provide customers the quick cash they need to deal with unexpected expenses. But those loans often mire borrowers in an even deeper cycle of debt.
Those who work with low-income families know this. That's why scores of faith groups, social-service organizations and consumer and veterans' advocates came together during the last session to oppose increasing the predatory-lending options. That's why positive alternatives such as Brightpoint's community loan center, which offers loans to credit-challenged applicants at far lower rates, are emerging around the state. That's why the Indiana Institute for Working Families and other groups are again urging the state to cap annual loan rates at 36% – the same rate set by the federal Military Lending Act to protect service members from being exploited.
Of course, none of this means those who support adding more high-interest loans that could ensnare already-struggling Hoosiers are heartless. It just means they haven't been listening. The interim committee is scheduled to meet three more times. Let's hope its members listen hard to the arguments for curbing, not expanding, predatory lending.