ZOLA: Rick Ward’s Usurious Loan Bill

A ‘Battle Royale’ is beginning to erupt at the Capitol. Sen Rick Ward spent a lot of time in Governor John Bel Edwards’ office four years ago drafting the new Louisiana Credit Access Loan Act. That bill was killed in May of 2018 during the Regular Legislative Session.

But, Sen Ward is back again this year, and SB 381 is better because it only charges borrowers 100% as opposed to 150%. Yes, that’s right. You borrow $500, and you pay back $1,000. This makes loan sharks look good.

Why is Ward carrying the water for the out-of-state company behind this bill? We don’t know, but that company happens to be one of the largest payday lenders in the country. According to the May 4, 2018 edition of the Business Report, Troy McCullen President of the Louisiana Cash Advance Association called the bill, “greed and arrogance at the highest level.” Ward claims his bill will help “borrowers dealing with an immediate financial emergency who don’t want to take out a payday loan.” So, is the company trying to run against itself or get into the installment loan business with higher fees?

It looks to us like a payday loan might actually be the better option. The payday loan fee on a $300.00 loan is $55.00 or 18.3% of the principal, and the customer pays back $355.00. According to Ward’s bill, the fee on one of his new $300.00 installment loans could be $300.00 which is 100% of the principal, and the customer pays back $600.00. While APR is confusing to all of us, the fees simply don’t lie.

Why is Ward trying to pass a bill that allows monthly maintenance fees of 13% on all loans? That’s a new concept. Why is Ward pushing a bill that calls for higher fees on loans already regulated under the Louisiana Consumer Credit Law? That’s unnecessary.

The fact of the matter is that installment loans of this size are already available at much cheaper rates through Louisiana’s large network of finance companies. Maybe that’s why the Louisiana Finance Association, the Louisiana Credit Unions and the Payday Loan Associations are all against this new Rick Ward loan.

We are all feeling the squeeze of inflation and gas prices. The higher rates on these new Rick Ward loans are not good for anyone except the out of state companies pushing for them.

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