Lynch vetoes short-term loan measure
Gov. John Lynch used his veto pen for the first time in the new year to shoot down a bill yesterday he said would allow New Hampshire citizens to fall victim to high-interest loans.
“These new installment loans are essentially payday loans that would create an escalating spiral of debt for New Hampshire families that would undermine their financial security, as well as the financial well being of our communities and our economy,” Lynch said in a statement.
Senate Bill 160 allows for citizens to obtain short-term installment loans. The bill says the interest charged per $100 installment could be no more than $15.50. But Lynch said there could be as many as 26 installments per year, resulting in an annual interest rate of more than 400 percent and doing away with an interest rate cap of 36 percent that had pushed payday lenders out of the state in recent years.
“On a six-month loan with payments every two weeks, lenders will be able to charge consumers over $1,100 to repay a $500 loan,” said the Democratic governor. “For vulnerable families, these excessive interest charges could force them further into a cycle of debt and potentially onto public assistance.”
The House’s Republican leadership released statements criticizing Lynch’s veto.
“The governor once again incorrectly assumes that New Hampshire citizens aren’t mature enough to make their own financial decisions,” House Speaker Bill O’Brien said. “By closing off a free market choice for consumers, the governor is putting citizens to the mercy of unregulated loan sharks. New Hampshire can, and will, do better than this.”
House Majority Leader D.J. Bettencourt said the bill was about supporting “fairness in the marketplace.”
“This legislation allows more choices for New Hampshire citizens and businesses while ensuring contract law is upheld and consumers enter these contracts with their eyes wide open,” he said. “The House will work to override this veto.”
That could be a tall task given the original votes on the bill in the House and Senate, which fell well short of the two-thirds majority needed to override a veto. The House passed the bill 208-139 and the Senate voted 13-11.
Lynch vetoed several bills last year, including a measure increasing the interest rate cap on car title loans from 36 percent a year to 25 percent a month. The House narrowly overrode the car title loan veto earlier this month in a dramatic swell of support after the bill initially passed with just a nine-vote majority.
In a statement yesterday, Jamie Fulmer, spokeswoman for South Carolina-based Advance America Cash Advance, said the interest rate cap signed by Lynch three years ago cost the state nearly 150 jobs in the short-term lending industry and pushed consumers to seek credit from “expensive, unregulated and predatory sources such as illegal offshore internet lenders.”
“Gov. Lynch’s veto of SB 160 represents another victory for those illegal offshore lenders and another disappointment for those consumers who seek regulated forms of short-term credit to meet their needs,” Fulmer said. Republican leaders should be commended for “their efforts to improve access to credit and to protect the welfare of their constituents.”
Lynch said the bill’s regulation and oversight of payday lenders was also of concern. The bill states that the banking commissioner must provide the lenders “reasonable notice” before examining their books, records and loan documents. The administrative fines the companies would be subject to for violations are less than half of what other lenders face, Lynch said.
“Consumers will not receive the same level of protection from payday lenders as they do now with other providers of consumer credit,” Lynch said.
(Matthew Spolar can be reached at 369-3309 or mspolar@cmonitor.com.)
Article source: http://www.concordmonitor.com/article/307901/lynch-vetoes-short-term-loan-measure?page=full
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