Examples of true bipartisan agreement seem to be all too rare these days, but we’ve found one. Both of us agree that 400 percent interest is too high, and that something must be done to protect Montana consumers and the state’s economy from predatory lending practices.
That’s why we’re supporting Initiative 164.
If passed, this initiative will do what the Montana Legislature has failed at during every session since 2003: Cap the interest rate on predatory payday and car title loans.
Under current Montana law, lenders can charge 650 percent annual interest for two-week payday loans and 300 percent annual interest for 30-day car title loans. The average annual interest on a payday loan is over 400 percent. I-164 will cap these rates at a far more fair 36 percent per year.
I-164 also will end the debt trap created by such lending practices. Too often, the working families and seniors who take out these loans find they can’t repay them in the short turnaround time required. As a result, they take out one payday loan after another. In time, they find themselves deeper and deeper in debt. And the industry relies on this cycle of debt for its profits. Research shows that 90 percent of the payday lending industry’s business comes from trapped borrowers who take out five or more loans per year.
In Montana’s current economy, nearly anyone could find him- or herself in need of an emergency loan due to a job loss or sudden crisis. In these situations, a predatory loan takes a bad situation and makes it worse.
Military families also struggle to get by. For years, these families were targeted and taken advantage of by predatory lenders. But when the U.S. Department of Defense showed that the high interest charged for payday and car title loans was putting a strain on these families and undermining the nation’s military readiness, Congress took action and capped the rate on these loans at 36 percent.
Now, Montana voters are in the position to provide the same protections for their fellow citizens.
All around the state, hundreds of I-164 campaign staffers and volunteers collected more than 27,000 voter signatures, easily placing this measure on the November ballot. Additionally, I-164 is supported by AARP Montana, Montana Catholic Conference, Montana State AFL-CIO, Montana Women Vote, the Montana Community Foundation and other organizations.
Voting for I-164 will not only protect working families and seniors, it will help protect the state’s economy. People trapped in a cycle of debt can’t contribute to our local economy by spending money on goods and services. Furthermore, most of the money spent on the fees and interest that goes to predatory lenders leaves the state. In Montana, seven out of 10 loan shops are owned by large-out-state corporations. Each year, they drain millions of dollars from our state economy.
Lenders should be able to make a profit charging up to 36 percent interest. Additionally, Montanans already can get short-term loans from area credit unions for far more reasonable rates than the 400 percent currently charged by payday and car title lenders.
No matter which side of the political aisle you sit on, it’s clear to see I-164 is what’s right for Montana. We hope voters will join us in voting FOR I-164 in November.
(Rep. Anders Blewett is a Democratic legislator representing HD 21 in Great Falls. Rep. Jesse O’Hara is a Republican legislator representing HD 18 in Great Falls.)