PROVIDENCE, R.I. (AP) -- Payday loan opponents including Treasurer Gina Raimondo urged Rhode Island lawmakers on Wednesday to limit interest rates on short-term loans — a proposal that payday lenders say could put them out of business.
A bill pending before the General Assembly would cap interest rates at 36 percent. Now, payday loans come with an annualized interest rate of up to 260 percent. Supporters of the limit argue the high rates make it difficult for low-income consumers to pay off a loan without taking out a new one.
"You take out a loan, and if you live week-to-week you have to borrow again," said Roger Paquette, a Warwick resident who said he repeatedly took out small loans because he couldn't afford to pay the interest. "You tell yourself, it's only $30. You don't realize how bad it is until it's been a year."
Paquette urged lawmakers, at a legislative hearing on the bill, to cap the rates.
The legislation has failed in recent years after running into strong opposition by payday loan businesses. More than a dozen employees of local payday lenders came to the Statehouse on Wednesday to defend their industry.
Jamie Fulmer of Advance America said capping interest rates could force his company to leave the state and deprive customers of a valuable financial alternative. Demetria Robinson, who has worked at Advance America for about a year, said her company serves people who have few options.
"When anyone comes to us, they come because they have a need," she said. "Having an option is better than not having an option ... I don't force anyone to walk in that door."
Advance America charges $10 for a two-week $100 loan.
Rhode Island is the only state in New England that allows short-term lenders to charge much higher rates than those charged by banks or other lenders. In 2012, more than 200,000 payday loans totaling more than $78 million were made in Rhode Island. Raimondo said the average payday loan customer takes out 10 loans in a year.
"Allowing predatory lending in our state weakens our state," the Democrat said. "This is a predatory product designed to trap people in a cycle of debt."
Some lawmakers, however, said they're wary of interfering with the free market.
"This is America," said Rep. Jan Malik, D-Warren. "Let business work."
The legislation is sponsored by Rep. Frank Ferri, D-Warwick, and Sen. Juan Pichardo, D-Providence.
Another proposal from Rep. Lisa Baldelli Hunt, D-Woonsocket, would reduce the interest rate payday lenders can charge to 130 percent.
Votes on the bills have not been scheduled.
- Payday loan
- Rhode Island
- Gina Raimondo
- interest rate