February 12, 2004

Atlanta— House lawmakers overwhelmingly passed the Payday Lending Act of 2004 today by a vote of 150-20. The measure seeks to rein in payday loans companies who provide fast cash to a customer by securing their next paycheck as collateral. Georgia usury law prohibits loans with interest above 60 percent a year, but many lenders in this business routinely make loans beyond 500 percent interest a year. However, current law says that violating the usury laws constitutes only a misdemeanor making enforcement almost non-existent. The practice has become common across the state.

Under SB 157 payday lending companies would have to get licensed and adhere to the Industrial Loan Act of 1955. This would subject them to class action suits and prosecution under the Racketeer Influenced and Corrupt Organizations (RICO) Act. Enforcement would be carried out by private attorneys, district attorneys or by the state’s Attorney General and the state could tax profits of illegal lenders at a rate of 50%. First offenders would face a misdemeanor of high and aggravated nature and those guilty of three convictions would be sentenced with a felony, and a fine of up to $10,000.

House Banking Chairman Johnny Floyd (D-Cordele), a key sponsor of the legislation stated, “This law will put some teeth into an industry that must be regulated, because those running afoul of the law must be prosecuted and curtailed. The current legislation represents the latest in a number of attempts in our history to regulate a group of lenders in Georgia who many would call unscrupulous and deceitful.”

“At stake is the protection of thousands of Georgians, especially around our military bases, who typically are poor, have no credit, no bank account, few assets and minimal collateral. As a result, some unscrupulous and unregulated lenders collect outrageous interest in perpetuity, rarely allowing consumers to buy down the principle. These are loans that plainly gouge a needy consumer, and we need to stop it,” said Floyd. “Credible lenders operate under the rules of the Industrial Loan Act already and respond to needs of the consumers. These lenders, such as banks, mortgage companies and other loan organizations are not affected by the Payday Lending Act of 2004.”

SB 157 now proceeds to a House and Senate Conference to work out conflicting language.

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For additional information, contact Representative Floyd at 404 656-5943.