Legislature(2023 - 2024)BARNES 124
04/21/2023 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB145 | |
| HB126 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 137 | TELECONFERENCED | |
| *+ | HB 138 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| *+ | HB 150 | TELECONFERENCED | |
| += | HB 126 | TELECONFERENCED | |
| += | HB 145 | TELECONFERENCED | |
| += | HB 21 | TELECONFERENCED | |
HB 145-LOANS UNDER $25,000; PAYDAY LOANS
3:16:22 PM
VICE CHAIR RUFFRIDGE announced that the first order of business
would be HB 145, "An Act relating to loans in an amount of
$25,000 or less; relating to deferred deposit advances; and
providing for an effective date."
3:16:32 PM
VICE CHAIR RUFFRIDGE opened public testimony on HB 145.
3:16:55 PM
KRISTI MAGUIRE, representing self, Bivocational Pastor, gave
public testimony in support of HB 145. She stated that she has
worked this past year with the Mutual Aid Network of Anchorage
to help members of the community pay back payday loans. She
said that people living paycheck to paycheck need these loans,
and she cannot think of an ethical reason for the interest rates
to be so high. She expressed praise for the generosity of
Alaskans and encouraged the legislature to create new solutions.
3:19:57 PM
ALAN BUDAHL, Executive Director, Lutheran Social Services of
Alaska, gave public testimony in support of HB 145. He stated
that Lutheran Social Services frequently receives calls from
people who are struggling to pay back payday loans. Oftentimes,
people use such loans to pay rent, and these high interest rates
disproportionately affect low-income individuals. He related a
story of a woman who went in to pay her loan shortly before the
lender closed; however, she was unable to do so and had to pay
significantly more interest.
3:22:11 PM
NOEL LOWE, Owner, Alaska Fast Cash, provided public testimony
during the hearing in opposition to HB 145. He stated that
payday loans are only a small part of his business, as these
loans are less profitable. He explained that payday loans are
meant for those with steady employment but no ties to
traditional lenders. He expressed the opinion that the examples
of predatory payday lending are coming from lenders outside of
Alaska, rather than the brick-and-mortar stores within the
state. He explained that stores in Alaska are highly regulated
by the state; however, online lenders outside of Alaska are not
concerned about regulations in the state. He expressed concern
that the proposed legislation would stop payday lenders in the
state; therefore, more people would have to turn to out of state
lenders. He argued that missing a mortgage or car payment often
has a higher interest rate than a payday loan. He added that
payday loan lenders are required to offer six-month payment
plans which stop more interest from accruing.
3:25:13 PM
REPRESENTATIVE FIELDS asked what percentage of profits come from
payday loans.
MR. LOWE answered approximately 10 percent. In response to a
follow-up question, he stated that the reason for payday loans
having such high interest rates is because the loans do not have
collateral.
REPRESENTATIVE FIELDS asked why there is a high rate of default
for payday loans, if the people taking them have steady
paychecks.
MR. LOWE answered that payday lenders do not want customers to
default, and the income guidelines are posted in the stores. He
added that each loan default is personal for each individual.
In response to a follow-up question, he expressed the belief
that traditional payday loan lenders would not offer this
service in states which have passed laws limiting interest
rates.
3:28:45 PM
REPRESENTATIVE PRAX asked whether payday loan lenders publish
their interest rates and whether they charge processing fees.
MR. LOWE answered that payday loans are short 14-day loans, and
the state allows a 15 percent interest to be charged, with a $5
fee late fee. In response to a follow-up question, he expressed
agreement that the fee is lower than the fee an individual would
be charged for over drafting a bank account.
3:32:08 PM
REPRESENTATIVE SADDLER asked how long the 15 percent interest
rate lasts.
MR. LOWE answered that the 15 percent interest rate is meant to
be for a short 14-day loan. He added that the interest rates
would accrue if it took an entire year to pay the loan posted in
the store. In response to a follow-up question, he said that
income guidelines are posted in the store. He added that the
terms in the agreement are reviewed with each customer, so each
customer understands the process.
REPRESENTATIVE SADDLER expressed doubt in his own ability to pay
back loans at the high interest rates he has seen.
MR. LOWE responded that the highest interest rates only apply to
loans which are not paid back in 365 days, when the loan is
meant to only cover 14 days. He compared this to renting a car
for a month, as the car would cost $50 for only one day, but it
would cost $1,500 for a month.
REPRESENTATIVE SADDLER asked whether a payday lender would
accrue additional costs if a payday loan were not paid back
within 14 days.
MR. LOWE answered that the state allows a borrower to extend the
interest two times. If that individual cannot pay back the
loan, the lender is required to offer a six-month payment plan.
In response to a follow-up question, he said that the only
additional cost is the lost opportunity cost of not being able
to loan the money to another individual.
3:37:10 PM
REPRESENTATIVE PRAX commented that payday loans are difficult to
collect, and the extension periods to pay back the loans have
the effect of reducing the actual posted interest rates.
3:37:44 PM
REPRESENTATIVE SADDLER asked how many borrowers use the six-
month payment plan.
MR. LOWE expressed uncertainty, as it varies seasonally. In
response to a follow-up question, he expressed the belief that
it is less than half. He added that only about 25 percent of
borrowers default.
3:39:29 PM
MARGE STONEKING, Advocacy Director, AARP, gave public testimony
in support of HB 145. She stated that AARP supports HB 145 in
order to protect the financial security of older Alaskans. She
expressed the opinion that older individuals have less options
to pay back debts, and short-term loans are more likely to harm
them than help them. She pointed out that there are small loans
available at banks, and these offer better options than payday
loans.
3:41:55 PM
VICE CHAIR RUFFRIDGE, after ascertaining there was no one else
who wished to testify, closed public testimony.
3:42:19 PM
REPRESENTATIVE PRAX commented that Mr. Lowe's testimony warrants
careful consideration. He said that in the retail business, bad
checks are often not collected because the cost of collecting is
not worthwhile. Although the costs may be high at a payday
lender, high costs and other consequences can occur if a payment
to a bank or credit card company is late. He expressed concern
that the bill would not work as intended and taking such steps
would be akin to putting warning labels on cigarettes.
3:45:15 PM
VICE CHAIR RUFFRIDGE announced that HB 145 was held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB0021A.PDF |
HL&C 4/21/2023 3:15:00 PM |
HB 21 |