At a time of historically low interest rates, state lawmakers gave final approval last night to legislation that ramps up the cost of consumer finance loans.
Meanwhile, consumer advocates are calling on Governor McCrory — who once made his oppostion to predatory “payday” loans a major plank in a mayoral reelection campaign in Charlotte — to veto the legislation. This was released earlier today:
AARP Calls on Governor to Reject Rate Hike for Consumer Loans, Senate Bill 489 Senate Bill 489 will increase rates and fees on consumer finance loans
RALEIGH — On Monday night the Senate voted to concur with the House’s amendments to Senate Bill 489. The bill now goes to the Governor’s office for his consideration.
“We are calling on the Governor to reject Senate Bill 489,” said AARP NC Director Doug Dickerson. “This legislation is going to hurt seniors and other consumers that use these loans by increasing interest rates and adding new fees.”
The legislation will significantly increase interest rates on consumer finance loans and add new fees costing consumers millions of dollars. Most of the newly-generated profit would go out of state to the six large lenders that control 69 percent of the market.
“The Governor should veto this bill. This is an abusive industry that profits at the expense of low-income working people by packing loans with expensive credit insurance products and continually flipping borrowers into new loans. Increasing rates and fees on these loans is only going to squeeze more money from trapped borrowers and create more unaffordable debt,” said Beth Young, an attorney with the Financial Protection Law Center.
Data from the commissioner of banks office shows that 66 percent of loans made in 2011 were renewals or “flipped” loans. In addition, many of these loans are packed with expensive credit insurance products.
Data from the commissioner of banks office also shows that the industry is recovering well from the recession.
According to news reports, Gov. Pat McCrory criticized his opponent in the 2007 Charlotte Mayoral race for supporting legislation to increase rates and fees on consumer finance loans.
Other governors have also vetoed legislation designed to increase loan costs. On August 19, 2003, with a Democratic House and Senate, Governor Easley vetoed House Bill 917, a bill increasing costs of loans.
There are no consumer groups supporting SB 489 and the legislation is opposed by the NC Attorney General, AARP-NC, the National Association of Consumer Bankruptcy Attorneys, the Navy and Marine Corps Relief Society and the Financial Protection Law