Indiana House approves legislation to allow 200 percent interest on payday loans

Inside Subprime: February 1, 2018

By Caroline Thompson

On Wednesday, the Indiana House of Representatives narrowly passed a bill to create a new category of payday loan in the state, despite fierce opposition from consumer advocacy groups.

Proponents of House Bill 1319, such as Rep. Woody Burton, say the legislation is intended to help people with poor credit secure access to larger, longer-term loans that can help them both emergency situations, and in the long run.

“We’re trying to develop something that will help them start establishing a line of credit and a credit report where they can move up and get a better type of loan,” Burton told Indiana Public Media.

But the new loans come with a serious downside, a big jump in the amount of interest lenders are allowed to charge borrowers. The new bill allows payday lenders to lend between $600 and $1,500 with a term of up to 12 months, and interest rates of up to 200 percent.

Last month, Republican Senator Greg Walker of Columbus introduced a bill to cap the annual percentage rate on payday loans at 36 percent, which is the national standard. At the time, a poll of 600 registered voters by Bell Weather Research found that 68 percent “strongly favored” the 36 percent cap, and another 20 percent “somewhat favored” it. According to an article in the Indy Star, the survey also revealed that “more than three out of four registered voters were “more likely” to vote for a candidate supporting such a cap.”

“Predatory loans, offered at triple-digit interest rates, destabilize Hoosier families and communities because this debt trap can lead to bankruptcy and housing instability,” said Kathleen Lara, policy director for Prosperity Indiana, which co-sponsored the survey. “As today’s poll shows, Hoosiers understand the inherent problems with this type of high-cost credit. We urge lawmakers to stand with us in supporting a 36 percent payday loan cap and opposing efforts to expand the industry.”

Even if the 36 percent cap legislation passed, House Bill 1319 would effectively render it moot, as the recently passed bill doesn’t address current payday loan laws, and instead creates an entirely new loan product that doesn’t need to play by the current rules.

“Payday lending works against (struggling Hoosiers), pulling families deeper into debt to the point of devastation,” said Erin Macey, a policy analyst for the Indiana Institute for Working Families. “This new product… is no better and will only prolong and deepen the debt trap.”

To learn more about the dangers of payday lending in Indiana, check out these related pages and articles from OppLoans:


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