Some small-dollar lenders prey on financially insecure consumers by providing quick cash loans with punishingly high interest rates and fees, making them all but impossible to pay on time. While Georgia has made progress in mitigating predatory lending by prohibiting payday loans, state law still allows other forms of high-interest, small-dollar lending. In Georgia, predatory small-dollar loans can include car title loans that carry interest rates between 187%- 300% and other installment loans of up to $3,000 that can have interest rates and fees totaling more than 60% APR (“annual percentage rate”).
During the 2017-2018 Legislative Session, Representative Earl Ehrhart (R-Powder Springs) sponsored House Bill 902, which would have transferred authority to govern loans under $3000 from the Industrial Loan Commissioner to the Department of Banking and Finance. HB 902 also proposed changing the name of loans under $3,000 from “Industrial Loans” to “Small Consumer Finance Loans”. While HB 902 did not pass the House last session, Georgia Watch supports the introduction of similar legislation in 2019 to protect Georgians from harmful loans by:
• Renaming the Industrial Loan Act, the “Small Consumer Finance Loan Act” and move car title lending under this Act so that these products are regulated as small-dollar loans that are subject to Georgia’s usury law;
• Transferring authority to govern small-dollar loans, including title pawn loans, to the Department of Banking and Finance, rather that the Department of Insurance or municipalities, respectively;
• Capping interest rates on small-dollar loans at 36% APR for all consumers to reflect the federal interest rate cap for military service members and their families;
• Requiring small-dollar lenders to evaluate borrower’s ability to repay any credit that is extended – including an analysis of both the borrower’s income and expenses, and
• Banning small-dollar lenders from sending unsolicited live checks to consumers.
Please support our efforts to protect consumers from the harms of predatory lending by supporting this legislation.
Past Georgia Legislation and Activity: During the 2017-2018 Legislative Session, Representative Earl Ehrhart (R – Powder Springs) sponsored House Bill 902, which would transfer authority to govern loans under $3,000 from the Industrial Loan Commissioner to the Department of Banking and Finance. In Georgia, the Industrial Loan Commissioner is also the Commissioner of Insurance in the Office of Insurance and Safety Fire Commissioner. Georgia Watch believes that transferring governance of these loans from the Office of Insurance and Safety Fire Commissioner to the Department of Banking and Finance is a commonsense move. HB 902 also would change the title of the Georgia Industrial Loan Act of 1955 to the “Small Consumer Finance Loan Act”. The bill would change the name of loans under $3,000 from “Industrial Loans” to “Small Consumer Finance Loans”. We believe that this renaming is a much-needed update that would provide clarity on these products. Georgia Watch’s Executive Director Liz Coyle testified in favor House Bill 902 during a hearing in House Banks & Banking Committee, but unfortunately, this bill did not advance during the Session.
Additionally, Senator Elena Parent (D-Atlanta) introduced Senate Bill 198 with bipartisan support during the 2017-2018 Legislative Session. The bill would prohibit lenders from sending deposit-able checks or money orders to Georgians without an existing contract. Georgia Watch testified on February 22, 2017 in support of SB 198. We supported SB 198 because it would have protected Georgia consumers from unknowingly taking out high-cost loans. Unfortunately, this bill did not advance further during the Session.