Senate OKs new payday-like loan

Controversial legislation proposing a new type of high-interest loan that detractors call an end-run around payday loan restrictions was fast-tracked to the Senate floor Wednesday.

Senate Bill 5312 passed the chamber 30-18.

Sen. Don Benton, R-Vancouver, was among the supporters. He cited the revenue the state would receive, even though the state budget office has estimated that costs would exceed those proceeds.

“This product will generate a significant amount of revenue in licensing and fees and so forth for the state of Washington,” he said. “So not only is it good for the citizens, but it’s good for taxpayers and it’s good for the state.”

One of the bill’s cosponsors, Sen. Nick Harper, D-Everett, voted no. Harper said he didn’t understand why the bill, which would allow installment loans with effective interest rates nearing 220 percent, was being rushed to a vote when it still needed work. He said sending the bill to the House to get “fixed” was just “punting the ball.”

The move also started a 30-minute floor fight with vocal payday loan critic, Sen. Sharon Nelson, D-Maury Island. Nelson offered up 14 amendments to the bill that would have slashed the effective interest rates to around 45 percent or less.

“I’m ashamed of what happened here today,” Nelson said. “They had told people here that this was a 36 percent (interest rate loan) product. And that’s a sham. A flat-out sham when you take a look at the calculations.”

Nelson said the talk about fixing the bill is also a sham.

All but one of Nelson’s amendments failed. The only one approved requires lenders to tell borrowers that the loans should only be used for short-term cash needs. Nelson acknowledged that amendment has little or no impact.

“Basically, I don’t believe that the payday lenders who are behind this are going to accept the other amendments,” Nelson said. “The work will not get done. The only working-over is going to be on the poor if this product moves forward.”

The bill is now headed for the House Business & Financial Services Committee chaired by Rep. Steve Kirby, D-Tacoma.

Kirby said his committee will likely pass some version of the bill. He said he planned to look at Nelson’s amendments, but he’s hesitant to change the bill too much from what passed the Senate.

“We’re going to have sideboards on it,” Kirby said. “You won’t get yourself in trouble. If you do, you’ll have to do it on purpose.”