Washington Senate passes bill to revamp payday loan industry

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All four Republican senators whose districts include all or part of Clark County voted yes on the bill. They are Don Benton, Ann Rivers, Curtis King and John Braun. Democratic Sen. Annette Cleveland of Vancouver voted no.

All four Republican senators whose districts include all or part of Clark County voted yes on the bill. They are Don Benton, Ann Rivers, Curtis King and John Braun. Democratic Sen. Annette Cleveland of Vancouver voted no.

OLYMPIA — The Washington Senate passed a bill Tuesday night that would reshape the state’s short-term loan laws in response to industry demands.

By a 30-18 bipartisan vote, senators approved a bill by Democratic Sen. Marko Liias of Lynnwood that would abolish the existing system, which allows two-week payday loans of up to $700 with 36 percent annual interest up to eight times in 12 months. In its place, Senate Bill 5899 would create a system where lenders could offer loans with monthly and other fees and a similar interest rate charged for up to six months.

The new model is based on a system created by Colorado five years ago.

“This is part of the way we built a financial model where these products can be offered in our state,” Liias said. “The market can sustain them.”

Seattle-based Moneytree lobbied on behalf of the bill. It now moves to the House, where a companion bill is pending.

The measure passed only after more than two hours of debate that stretched past 10 p.m. and required an official vote to keep the Senate floor open. Democrats proposed dozens of amendments that would have cut the interest rates and fees attached to the short-term loans.

“We are creating a situation where people will default and will continue to put themselves in a greater and greater cycle of debt,” said Sen. Pramila Jayapal, a Democrat from Seattle who proposed several of the amendments.

Most of them failed after Liias said they would harm the industry’s viability, which would leave those in need short on places to go for money.

“We ended the payday industry and replaced it with something that’s lower cost for most borrowers,” Liias said.

He and Sen. Pam Roach, R-Auburn, both spoke of times in their lives when they had turned to high-interest short-term loans as reasons to keep the products available.

“I was grateful for the opportunity,” Roach said. “I could still hold my head up. I didn’t have to ask relatives for money.”

Opponents called the loans exploitative of vulnerable people who may not understand how many charges are piled into the loans, including origination fees, a monthly fee and interest on the outstanding balance.

“I’ve not heard anyone other than two members of this chamber stand up proudly to support this bill,” said Sen. Cyrus Habib, D-Kirkland. “I think I know why. It’s because the rates in this are nothing short of usury.”