"I think we have to help people and protect people from going through a cycle of poverty where they're continuing to get more debt . . . because of refinancing these payday loans, which is what's been happening," Lynch said. "On the other hand, there is also a need."
Title lenders offer cash with the borrower's car used as collateral. Payday loans are small cash advances secured by showing a pay stub and sometimes relying on a postdated check as security. People ineligible for traditional loans are drawn to the lenders because they don't rely on credit checks.
Arguments about the bill, which cleared the House 207-124, pitted consumer choice against consumer protection. Advocates for preserving the loans argued that they are one option consumers should have and that, in some cases, the interest and penalties are less expensive than alternatives such as bouncing a check or racking up credit-card debt.
"New Hampshire consumers have the right to make their own credit choices," said Rep. Steve DeStefano, a Bow Democrat who advocated an amended version of the bill.
New Hampshire and Rhode Island are the only states in New England where payday lending is not restricted. The industry has been on the rise in New Hampshire since 1999, when the Legislature removed a 24 percent cap on interest rates. There are about 50 payday loan storefronts across the state, and they made 149,000 loans in 2006.
Majority Leader Mary Jane Wallner, a Concord Democrat, said that the bill "eliminate triple-digit usury interest rates" and noted that the bill's backers include the attorney general's office.
"It's too easy for people to borrow and too hard for them to get out from under," said Rep. David Kidder, a New London Republican. He said that "easy borrowing" is what led to the nation's mortgage crisis and violates what he called "Republican ideals of thriftiness."
Not everyone agreed with him. Rep. Marshall Quandt said that on the 160,000 payday loans last year, only 12 complaints were filed. He said that constituents have a right to the payday loan option and are smart enough to know whom to call if they have a problem.
"The voters are smarter than we think," Quandt said. "They're not stupid. Hey, they elected us!"
Industry advocates also argued that short-term payday loans, which run for one week to one month, shouldn't be measured in annual interest rates. Lenders dole out from $100 to $500 in a typical loan and charge a fee of $20 per $100, said Jamie Fulmer, a spokesman for payday lender Advance America, which has 21 stores in New Hampshire.
He said that a 36 percent interest rate would mean the company would be limited to charging $1.38 in fees in a typical two-week period - or about a dime a day, a margin that he said was too small to cover the company's basic bills. Fulmer said that he could pay a higher rate taking money out of his own bank account ATM.
"Stores would be forced out," he said.
Fulmer said that the bill has yet to clear the Senate or the governor's desk, saying that yesterday's vote is "just one step" in the process.
Hildreth said he believes payday lenders would shutter in New Hampshire under the proposed regulations.
"That's what's happened in other states," Hildreth said. "I think the House did the right thing."
By LAUREN R. DORGAN
Source: Concord Monotor Date: January 17. 2008
