Florida lawmakers are considering a proposal that would allow interest rates as high as 36 percent on consumer-finance loans, with supporters saying it would increase access to loans and opponents arguing it would hurt poor people.
The House State Administration & Technology Appropriations Subcommittee on Wednesday voted 10-3 to approve the proposal (HB 1267), which would replace a system that includes maximum interest rates of 30 percent. A Senate version of the bill (SB 580) began moving forward in late March.
House sponsor Juan Alfonso Fernandez-Barquin, R-Miami-Dade County, said the state has a large number of “unbanked” residents who have difficulty getting loans. He said that leads many people to turn to online lenders who charge far-higher rates than consumer-finance businesses in Florida.
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Fernandez-Barquin said allowing a maximum interest rate to 36 percent would broaden “the base of risk” for consumer-finance companies, allowing more people to qualify for loans.
“There’s a whole segment of the population right now that wouldn’t qualify for these loans right now,” Fernandez-Barquin said. “If we increase the interest rates, they can qualify for them.”
But Rep. Russell Meyer, executive director of the Florida Council of Churches, described a 36 percent interest rate as “usury” that would take advantage of poor people who need help in paying living expenses.
“What this does is charge people rent on living, rent on breathing, rent on feeding the children,” Meyer told the House panel. “And every religious tradition has considered that immoral.”
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Rep. Angie Nixon, D-Jacksonville, described a maximum interest rate of 36 percent as “predatory.”
“Thirty-six percent interest rate?” she said. “That is wild to me.”
But Scott Jenkins, a lobbyist who is executive director of the Florida Financial Services Association, pushed back against the “predatory” assertion, telling House members it is “a complete misnomer to get you guys fired up, basically.”
Under current law, Florida has a three-tier system of interest rates for consumer-finance loans. Companies can charge 30 percent annual interest on the first $3,000 of principal amounts, 24 percent on amounts between $3,000 and $4,000 and 18 percent on amounts between $4,000 and $25,000. The bill would set an across-the-board maximum annual 36 percent rate.
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Fernandez-Barquin said some of the loans are secured by property, while others are not.
The bill also would increase regulations on consumer-finance companies, including requiring that they submit annual reports to the state detailing loan data.
Elizabeth Hammond, vice president of governmental affairs for Mariner Finance and a former North Carolina regulator, said the bill would open loans to people who don’t qualify under the current structure and would boost competition in the market.
“This will bring additional competition to Florida, and that’s good for consumers,” Hammond told the House panel. “The more competition that’s there, the more that we compete against each other and the more that the customer gets a good, competitive rate instead of having to go online.”
But Karen Woodall, executive director of the Florida Center for Fiscal & Economic Policy, questioned how people could afford loans at a higher interest rate if they can’t qualify at the current rates.
“This is a significant increase in interest rate on consumers that are already financially vulnerable,” Woodall said.
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