Gov. Mary Fallin vetoed a bill on Friday that would have created a loan with a 204 percent annual interest rate.
In her veto message, Fallin wrote that the bill, which reflects a national push from the payday lending industry for similar legislation, would create a high-interest product without restricting access to other payday loan products.
“In fact, I believe that some of the loans created by this bill would be MORE EXPENSIVE than the current loan options,” she wrote.
Oklahoma’s legislation had one of the highest potential annual interest rates among 10 similar payday lending bills this year in seven states, an Oklahoma Watch review found.
House Bill 1913 would have created “small” loans with a monthly interest rate of 17 percent, which equates to 204 percent annual interest rate. A 12-month loan of $1,500 would leave borrowers owing about $2,100 in total interest if all payments were made on time.
Asked for comment about the bill, the office of one of its sponsors, Rep. Chris Kannady, R-Oklahoma City, referred all questions to a senior vice president at a large payday lending company, Advance America. The company is part of Mexico-based Grupo Elektra, which is the largest payday lending firm in the United States and is owned by Mexican billionaire Ricardo Salinas.
“Our company provided input based on our perspective as a marketplace provider,” he said. “I’m sure a lot of folks provided input, as is the case with every piece of legislation.”
HB 1913 would not have required lenders to check a borrower’s ability to pay and would have given the lender direct access to customers‘ bank accounts.
Fallin vetoed legislation four years ago that would have created a short-term loan with an annual interest rate of 141 percent.
Supporters of the bill said it would increase borrowing options for people who have poor credit records and can’t obtain lower-interest loans. Opponents said the loans would be predatory because the interest rates are high and could bury vulnerable borrowers in debt.
A spokeswoman for the bill’s other sponsor, Sen www.signaturetitleloans.com. James Leewright, R-Bristow, said he was also unavailable to answer questions. In a written statement, Leewright said the bill offered higher-risk borrowers “a much better product” and improves their options.
The bill proposed a type of loan that is different than traditional payday loans. Payday lending involves loans of up to $500 that borrowers are expected to pay back in a lump sum within 12 to 45 days. The proposed new small loans could be up to $1,500 and borrowers would pay them back monthly for up to 12 months.
Payday loans have higher rates that are currently capped at 456 percent in annual interest. The new small loans are capped at an interest rate of 17 percent a month, or 204 percent annually.
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Ezekiel Gorrocino, a policy associate for the Center for Responsible Lending, a North Carolina-based nonprofit that fights predatory lending practices, described the legislation as a “prepackaged” bill that payday lending companies have pushed over the past few years across the country.
Gorrocino said the industry advocated for the same legislation in about a dozen states this year, but most of the bills didn’t survive. Similar legislation appeared in Arizona, Indiana, Iowa, Kentucky, Maine and Nebraska.
Of the 10 payday lending bills the center identified this year, HB 1913 appears to have one of the higher potential interest rates, mainly because the bill does not expressly prohibit compounded interest. That occurs when a borrower misses a monthly payment, and the interest owed is folded into the loan’s principal. The bill also says the act “shall not be subject to or controlled by any other statute governing the imposition of interest, fees or loan charges.”