A bill to cap “payday and car title loans with a 20% interest rate has been introduced.
Interest rates on payday loans can run into the hundreds of percentage points. The Center for Responsible Lending reported Delaware’s rate runs nearly 400%
In Delaware, a court can decide whether an interest rate is excessive.
Payday loans are a legacy of Delaware’s ground-breaking legislation that took limits off of interest rates and led to an influx of credit card companies.
The bill would cap interest rates at 20% for short-term consumer loans of $1,000 or less that must be repaid in less than 60 days and motor vehicle title loans.
Payday loan providers justify the rates by claiming they provide an alternative to “loan sharks” and fill a need for people who need money in a hurry.
Payday and car title loan storefronts are common in Delaware. Adjoining states have outlawed the loans, and many of the storefront offices would likely disappear.
The bill was assigned to the House Economic Development/Banking/Insurance & Commerce Committee. Legislators have made efforts over the years to rein-in payday lending.
Click here for a summary of the bill.