At the close of last month, Rep. Helene Keeley introduced house bill 289 that’s goal is to limit the of number of payday loans a consumer can get in a year. Specifically, the bill limits the number of sub $1,000 loans a person can get to 5 loans per 12 months. Currently, Delaware has no limit to the number of loans a consumer can take out in a year. While Representative Keeley has declared that this can be dangerous for consumers, the bill is wide ranging and not as thought out as it should be.
The bill labels the loans to be limited as any loan with a repayment period less then 60 days. While the drafters of the bill have said they left open other paths for consumers to take, such as loans from federal credit unions, they have done more then just limit payday loans. The average payday loan has a repayment cycle of 2 to 4 weeks, depending on the consumers pay cycle. The 60-day label ropes in several other loan and short term financing options that are not specifically payday loans, but still have a short repayment cycle.
Additional, they law does not allow for special circumstances. If someone has hit their max allowed payday loans for the year and has a sudden emergency, such as a car accident or fire, that consumer has no or extremely limited options for temporary relief from bills or other financial pressures. They will be force to rely on either charity, a solution that is extremely unstable in its availablility, or extra-legal options, such as loan sharks.
While the limit is in itself not a bad idea, as it keeps consumers out of the repeating loan cycle that some find themselves.
Additionally, the law does not limit the number of loans at one time, just the total number of payday loans. A much larger problem then repeat payday loans are multiple payday loans at one time, since they often exceed the amount the consumer is able to repay.
House Bill 289 is currently assigned to committee, and there is no word when this bill will come up for a vote.