There are many different legislative procedures going on across the nation in the payday loan industry. Many of them are utilized to provide some type of regulation one way or another, but they are not all working as effectively as they should. Either way, this is part of the devolution process that is making the states more powerful and the Federal government less so. By giving states more power to decide over their own affairs, it is possible to use them as testing grounds for others.
In Louisiana, a new bill is being pushed to cap some of the costs for the industry. In Baton Rouge (the capital of Louisiana), a new bill has been started to begin the process of making payday loans less painful for those who are caught paying them all day. The biggest question for lawmakers inside and outside the state is whether or not the loan capping is going to work.
What is Loan Capping in Louisiana?
Right now there are many payday loan companies that charge extremely high rates on people that utilize their services. It makes sense for this to occur because of the free market prices of these collateral free loans. Nonetheless, it can be detrimental for the longevity of senior citizens and other people in the states of Louisiana and the rest of the nation.
On Monday they are seeking to make it impossible for payday loan companies to charge interest rates of anything higher than 36%. Most of the time the companies are able to charge individuals upwards of 100 or even 200% on their payday loans. This is something that has groups like AARP very concerned given the large number of elderly individuals who are getting into debt with these types of companies.
Some of the payday loan companies are fighting back as usual. Not only are they using lobbying groups to help them win support to crush the legislation, but they are outspoken about the events as well. For example, one public affairs vice president mentioned that the government is seeking a policy of “backdoor prohibition”. While most politicians, legislators and citizens will not agree with that, some people fear heavy restrictions on these types of companies.
There is a lot at stake with loan capping, which is why it is such a hot topic in the state of Louisiana and in the nation as a whole. If a company gets their loans capped, there is a good chance they might be unable to make the business work properly. The whole industry is based on few people repaying them back and therefore needing to charge very high rates to make up for it. How will capping effect their business?
Loan Capping Nationwide
Many people are concerned with the prospect of loan capping across the nation. It screams of regulations that can squeeze out a certain industry that does offer services to millions of people. Whether it has predatory practices or not, it is used as a way of helping people who are in need of cash without any credit.
It will be interesting to see what happens in the state of Louisiana. Considering there are so many different issues to the debate, it will be interesting to see if all parties can make it through such a predicament intact.
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