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Ballot Initiative Could Put Short Term Lenders out of Business

By KFBB News Team

Story Created: Jul 27, 2010 at 4:14 PM MST

Story Updated: Jul 27, 2010 at 4:14 PM MST

Among the ballot initiatives to make this November’s polls is one that could put some restrictions on payday and title loan services. Short term loan companies can charge fees equaling one fourth of the loan total, which, on 31 day loans, would equal close to a 300 percent annual interest rate.

Initiative 164 would put lower restrictions on how much title and payday loan companies can charge in fees and interest. The initiative wants to cap the interest rate and fees lenders can charge at 36%. “There’s no way, if this passes, the services we offer will no longer be available in Montana,” Jullie Howen says.

Howen with Title Cash Stores says lenders will struggle to meet their base needs with the new proposal. And believes there is a need for the services she provides. Saying, “Banks don't want to deal with small amounts or short term loans, that’s one of the biggest issues where we really feel there is a market need.”

Deb Evans, at Teachers Credit Union, says she offers some alternatives, but it's not quite the same. “Many people may have the mistaken belief that a financial institution won’t or can’t help them,” she says.

She adds one advantage of the Credit Union is the counseling and education provided with the loan. Saying, “Along with those programs, at most credit unions you see some element of counseling or education.”

Howen says interest rates may be high for long term loans. “But for two weeks, that’s not very much,” she says. And as far as fees go, they are comparable. “One of our customers is a retiree but he doesn’t want to take funds out of his 401(K) because our fees are less than what the government would charge him to get funds out of his 401(K),” Howen says.

Evans says she hasn't seen a rise in loans since the downturn in the economy, but Howen has seen a 30% increase in customers statewide since December and worries what would happen without short term lenders. “Bankruptcies go up when we’re not in there and quality of life definitely decreases for many of our customers,” she says.

Howen says it seems like the supporters of the initiative are people who don't use the services and just see the interest rates. To read the ballot language visit: http://sos.mt.gov/elections/archives/2010s/2010/initiatives/I-164.asp

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paydaylendingrep said on Thursday, Jul 29 at 7:53 AM

I agree that most of payday lending services will be out of business if this initiative passes. Even a non-profit tax-exempt Goodwill charges about the same for their 'good money' loan, and that's only to break even. Banks, especially big ones, do not offer the service, because they do not want to deal with high risk small-dollar short-term loans. In any case, reputable payday lenders provide the service that is needed, and do not fit the definition of 'predatory', because they are businesses and not a welfare reducing form of credit.

Well... said on Wednesday, Jul 28 at 9:15 AM

Screwed how? Tricked? ALl of these companies clearly state the terms...more likely the consumer screwed the company by not paying. People can look out for themselves and not told by others what is best for them. Mind your own business as long as no one is tricking, stealing, or deceiving anyone...sheesh...!

Dave said on Tuesday, Jul 27 at 7:02 PM

This is a pretty one sided article for a news agency that is supposed to be unbiased. How about an interview from a client that has been screwed over by these parasites.

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