By Rep. Paul Anderson
One of the bills passed last week on the House floor was HF 2293, legislation that puts limits on the number of loans a person may take out from so-called “payday lenders.” This type of loan is usually a short-term note, where the borrower pledges his or her next paycheck as collateral. Interest rates are high, and other fees attached to the note can add up to make the cost of these notes relatively expensive when amortized over an entire year. It was also brought out during debate that, on average, people who utilize this type of loan take out ten such notes per year.
The bill does very little about the actual cost of the loans, as its main feature limits to four the number of such loans a person may take out in a year’s time. At least two DFL members said during debate on the measure that this bill, if passed, would “break the cycle of poverty” for those who use payday loans. I just can’t understand that line of thinking. If folks currently take out many of these loans each year, what’s going to change just because they will now be limited to four? If they take out the second loan to cover the first, and the third to cover the second, and so on, what’s going to magically happen after taking out their fourth? We have done nothing to break the cycle of poverty; in fact, all we have done is to limit the choices available to that person.
It was also mentioned that folks needing this type of loan would be better off if they stayed “local” when looking for a lender. Well, if someone was contemplating a payday loan, chances are pretty good they wouldn’t qualify for a regular bank loan. Interest rates are based on risk, and there’s a level of risk above which banks would pass on such a loan.
I think most would agree that payday loans are expensive because of the increased risk associated with them, and that they should only be utilized as a last resort. But they are a choice for people, and if this legislation is signed into law, that choice will be limited. And we will have done nothing to break the cycle of poverty for those who feel this is their only option.
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We seem to be stuck in a weather pattern again this spring that’s not conducive to getting much outside work done. Last weekend’s general rains have saturated the soil, which is good, but these cold, windy conditions are doing nothing to warm up the ground. According to the calendar, this week should be prime corn planting time, but little if any will get done because of the weather system that’s stalled overhead. If there’s anything positive about the cold temps we’re experiencing, they are keeping us from having the severe weather that’s hit further south.
If corn planting is delayed this year, farmers will need to think once again about crop drying in the fall and what happened last year with propane. Late planting usually means a wetter harvest and more crop drying. No one wants to experience another round of propane shortages and sky-high prices like we saw last year. And if producers can’t secure enough propane at moderate prices to dry what might be another wet crop, they may forego planting corn and switch to other crops, such as soybeans. The next few weeks will be critical as we look for clearing skies and warmer temperatures.
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