The Journal Gazette
 
 
Sunday, January 23, 2022 1:00 am

DEBT LOAD

Working together, we can beat back threats to our most vulnerable

Steve Hoffman

Once again, a bill has been introduced in the General Assembly that would dangerously expand predatory lending in Indiana.

Despite years of testimony from social service organizations, veterans' groups, churches, community development organizations and many more (including previous borrowers!), our legislators continue to feel the need to change our laws to allow for increased predatory lending.

Instead, they should be following the lead of other states and eliminating the practice all together.

I have spent years discussing this issue with literally thousands of people during meetings, speeches, presentations and private conversations. All are shocked to hear that Indiana allows payday loans with a 365% annual percentage rate. They clearly see that when on average a payday borrower takes out eight consecutive loans, this illustrates a debt trap, not confirmation that these loans are helping people.

In fact, 90% of Hoosiers support a 36% APR cap on all lending in Indiana. This comes from a statewide public opinion poll conducted by Bellwether Research.

A question I hear constantly from the public is, “Who in their right mind is for expanding predatory lending?” Or, “Why do we continue to allow this to be?”

The arguments I hear most often from legislators are that these loans provide a critical service. That they provide access to capital for a population that has no access otherwise. That these loans are critical for helping families in need out of financial difficulties.

Brightpoint has more than 300 employees, and we work with thousands of households every year that are having financial difficulties. I can tell you emphatically that no one here has ever referred a family to a payday lender as a solution. We know that a predatory loan will not help; it will only make the situation worse.

I can say with near 100% confidence that none of our social service partners, township trustees, churches or any other organization that helps families financially has ever referred anyone to a payday lender (if you are curious, please take the time to ask your favorite charity whether they have ever done so).

This alone should be proof to anyone that these loans are not a key “service.” My network is constantly seeking resources to help families. We would be payday lenders' most prominent source of advertising if it were a useful service.

What I think is clear is that this industry, besides damaging the financial situation of borrowers themselves, comes with a tremendous public cost. The public is in fact subsidizing the fees and interest these lenders charge.

We know that two-thirds of payday borrowers eventually pay off their loans only with outside help (this is self-reported, I would venture to guess the figure is even higher if we really analyzed the assistance these households are receiving). This help comes from social service organizations, township trustees, family and friends. These resources originate from individual donations, taxpayers and citizens who want to help their loved ones.

The public is massively subsidizing the $40 million annually in fees and interest this industry generates.

I could continue to drop statistics, but the logic behind why this issue needs to be addressed is clear to almost everyone. And yet we continue to see legislation to expand this type of lending in Indiana.

This session, Senate Bill 352 has been introduced. It is being touted as an improvement, when in reality it is simply an expansion. It does nothing to eliminate the current payday lending product, but instead adds new products.

One of those, for example, allows for a loan of up to $2,500 for up to two years, at 224% APR. This sounds like an improvement, sure, when simply comparing APRs. But in fact this product would cost a borrower more than $9,000 in interest and fees and result in a $475 payment that very few of us could afford.

This is not an improvement; it's an added opportunity to extract revenue from people who can ill afford it. Remember, these folks were already in a financial crisis to begin with!

I am happy to report that the coalition that I belong to, Hoosiers for Responsible Lending, has once again been able to help introduce legislation that would cap all lending in Indiana at 36% APR (SB 253 and HB 1159). This would mirror federal law regarding lending to military members, as well as the direction several other states have moved in the past several years.

Sadly, we don't see that these bills have much of a chance. In fact, we're much more fearful that SB 352 actually will pass. It is just where the legislature sits at this time.

I feel that, in general, our legislators have not heard from their own constituents on this issue. We need to make our legislators aware that this is an issue we care about. We need to tell them that this industry has no value in our communities, that it only preys upon people and for the most part ends up as a cost to the public with zero benefit attached.

I ask that everyone please take a moment to send their legislator a quick email, regardless of your position. They need to hear from hundreds, even thousands, of us.

If they hear more clearly and emphatically what the public thinks, I really believe that eventually we will see the correct result on this issue.

Steve Hoffman is president/CEO of Brightpoint.

Contact your legislators

By mail 200 W. Washington St. Indianapolis, IN 46204-2786

By phone

(800) 382-9842 for House Democrats

(800) 382-9841 for House Republicans

(800) 382-9467 for state senators

By email

Go to www.in.gov and click on "legislators"


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