Liias bill on payday loans nearly dead in legislature

A bill on payday loans, sponsored by Democratic State Sen. Marko Liias, appears to be dead for the current legislative session.

Fellow Democrats have criticized Lias for sponsoring the bill, saying that it weakens Washington’s strict rules on payday lending.

The bill passed the State Senate in early March by a 30-18 vote, with Democratic Sens. Maralyn Chase and Rosemary McAuliffe voting no.

In the House, the bill got a “pass” recommendation from the committee on business and financial services, with Democratic State Rep. Cindy Ryu voting for a “do not pass” recommendation, and Rep. Derek Stanford voting to make no recommendation.

Majority House Democrats then sent it to the House committee on general government and information technology, which had a public hearing Monday, April 6, but took no action, meaning that the bill missed a Tuesday, April 7, deadline to reach the House floor. The committee has no more scheduled meetings.

The bill now can be revived only as one “necessary to implement the budget.”

Senate Republican leader Mark Schoesler of Ritzville told the Associated Press last week that a payday-lending plan could ultimately be part of any final budget deal.

Nothing in the Liias bill or a companion House bill is part of either the Senate budget or the House budget.

Leaders in both the Republican-controlled Senate and the Democratic-controlled House will negotiate a final state budget over the next two weeks.

Chase and Ryu represent the 32nd Legislative District, including Lynnwood, Woodway and nearby unincorporated areas, parts of Edmonds and Mountlake Terrace, the city of Shoreline, and part of Northwest Seattle.

McAuliffe and Stanford represent the 1st Legislative District, including most of Mountlake Terrace, all of Brier and Bothell, unincorporated areas of Snohomish County north and east of Bothell, part of Kirkland, and unincorporated areas of King County between Bothell and Kirkland.

Liias represents the 21st Legislative District including most of Edmonds, unincorporated areas north of Edmonds and Lynnwood and northeast of Lynnwood, all of Mukilteo and part of south Everett.

He has not replied to telephone or e-mail messages.

The bill would rewrite payday-lending laws to favor longer-term high-interest loans.

Senate Bill 5899 is endorsed by Seattle-based Moneytree and opposed by Gov. Jay Inslee.

At a 32nd District town-hall event in mid-March, Ryu reportedly took Liias to task for his support of SB 5899, which would re-shape payday loan regulations to allow longer-term borrowing.

“If you know Marko Liias, go slap him up the side of the head,” Ryu reportedly said. “What was he thinking? There are all sorts of rumors going on that he is running for higher office, that he got money from the Moneytree folks.”

Washington’s restrictive law has damaged the business of Moneytree and other payday lenders.

Total payday loans in Washington have dropped by more than 75 percent and the number of lending stores has shrunk by a similar amount.

Critics of the industry say that those drops in business prove that low-income consumers no longer are trapped in what one legislator called a debt trap — taking out one loan to pay off a previous one, and eventually racking up thousands of dollars in debt.

The bill creates a new small consumer-installment loan regulated by the Department of Financial Institutions, eliminates traditional payday loans, permits loans of up to $700 for six-month terms, allows an origination fee of 15 percent of the loan amount, spread over the life of the loan, allows an interest rate of 36 percent per year, allows a maintenance fee of 7.5 percent of the total loan amount per month with a maximum fee of $45 a month, provides for a repayment plan prior to any civil action upon a loan in default, makes military borrowers ineligible for small consumer-installment loans and creates prohibited practices for licensees.

The proposal is modeled after a Colorado law.

Backers say it would be a win-win — reviving the lending business while giving consumers access to more affordable short-term credit.

Proponents say the new system could save borrowers money since interest and fees accrue over the life of the loan. However, a loan would need to be paid off in around five weeks or less for that to work.

The Seattle Times said in early March that in Colorado, since it has allowed similar installment loans, the average loan has been carried for 99 days.

But anti-poverty and consumer-advocacy groups say that new fees would undermine 2009 reforms and ensnare more people in a debt trap.

Evan Smith can be reached at schsmith@frontier.com.

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