A bill that would expand the payday loan industry has passed the Senate.
Louisiana Sen. Rick Ward, III, R-Port Allen, wrote the proposed legislation: Senate Bill 365 , or the Louisiana Credit Access Loan Act.
Payday loans today are capped at $350 for terms of 60 days or fewer. The bill would expand them to allow payday loans between $500-$875 for terms of three to 12 months.
"What this bill really does is expands an industry that really should be contracted," said Jan Moller, director of the Louisiana Budget Project that advocates for low- and middle-income households.
Moller said that almost nine in 10 payday borrowers take out new loans within two weeks of paying one off. That can lock people into a debt cycle, and with all fees and interest considered, they can pay annual interest rates that amount to as much as 700 percent.
In the proposed expansion, annual interest rates on these longer-term loans could still top 160 percent, Moller said.
The bill passed the Senate on Tuesday with a 20-17 vote.