In a move that would allow payday lenders to return to the state and set up shop, the New Hampshire House today voted to dramatically increase the maximum allowed interest rate for vehicle title loans. SB57, An Act Relative to Regulation of Title Loan Lenders, passed the House by a narrow 180-171 vote. It previously passed the Senate by a 17-6 margin.
Although payday loans are marketed as quick solutions to occasional financial shortfalls, new research from the Center for Responsible Lending shows that these small dollar loans are far from short-term. Payday Loans, Inc., the latest in a series of CRL payday lending research reports, found that payday loan borrowers are indebted for more than half of the year on average, even though each individual payday loan typically must be repaid within two weeks.
CRL’s research also shows that people who continue to take out payday loans over a two-year period tend to increase the frequency and extent of their debt. Among these borrowers, a significant share (44 percent), ultimately have trouble paying their loan and experience a default. The default results in borrowers paying more fees from both the payday lender and their bank.
The proposed law would allow the maximum interest rate on vehicle title loans to jump from 36% a year to 25% a month. It would overturn the current cap on interest rates signed into law by Gov. Lynch in 2008.
Lynch spokesman Colin Manning said Lynch wants to see the bill but remains opposed to this type of “predatory lending.”