Finance study committee meets to discuss payday lending

By Emily Ketterer

INDIANAPOLIS––Lawmakers listened to four hours of testimony Thursday in an effort to determine how the legislature should handle the payday lending issue in Indiana.

The Interim Study Committee on Financial Institutions and Insurance convened its first meeting of four scheduled throughout the fall on a number of topics, and the first issue focused on revising Indiana’s consumer credit code.

Rep. Woody Burton, R-Greenwood, said he was concerned with how long short-term payday loans lasted during the meeting of the Interim Study Committee on Financial Institutions and Insurance. Photo by Emily Ketterer,

This follows controversy over legislation presented in the 2019 session that would have allowed lenders to charge interest rates at what was considered “loan sharking” levels—more than 72% interest. The bill died on the House floor in the spring after narrowly passing the Senate.

The consensus among committee members was to find a solution to help borrowers of short-term loans pay off debt in a reasonable amount of time versus over a long period of time. Testimony with suggestions from consumer advocacy groups and the payday lending businesses ran from mid-morning until the late afternoon.

Indiana law authorized payday loans in 2002. The idea was to make small loans available to working Hoosiers who need a quick infusion of cash but might not qualify for or don’t want to take out a traditional small loan.

Consumer groups advocated for an interest rate cap at 36% on loans, which was drafted in another bill during the 2019 session but failed to garner votes.

Erin Macey, senior policy analyst for the Indiana Institute for Working Families, said data show 82% of borrowers will take out another loan to make the loan payments from the first, causing the loans to switch from short-term to long-term.

“People are struggling to manage the credit they have,” Macey said. “Payday lenders position themselves as a quick and easy solution to these financial troubles. Unfortunately, these end up like a ball and chain.”

Erin Macey, senior policy analyst for the Indiana Institute for Working Families, told members of the Interim Study Committee on Financial Institutions and Insurance that payday loans are like a “ball and chain” for borrowers trying to get out of debt. Photo by Emily Ketterer,

Also among solutions presented was creating a licensing system for short-term loan businesses, said Lyndsay Miller, interim deputy director of the Consumer Credit Division, and general counsel for the Indiana Department of Financial Institutions. She said the state would be able to better review legal documents for the companies.

“It would be beneficial in guarding against emerging predatory industry utilizing consumer leases to get around consumer credit laws,” Miller said.

Brian Burdick, an Indianapolis attorney at Brian and Thornburg LLC, represented the payday lending business, and said that regulation will put payday lenders in Indiana out of business, and drive borrowers to go to online lenders, which have more risk.

“It doesn’t decrease the demand for the loans, so people just go to the unregulated market,” Burdick said.

Rep. Woody Burton, R-Greenwood, questioned Burdick on the lenders’ ultimate goal and how long they want to hold on to borrowers trying to pay back loans.

Burdick said the problem is there is a subprime credit gap, and the end goal of payday lenders is to lead borrowers on a path to bankability and credit worthiness.

The study committee will reconvene Sept. 4 in a joint meeting with the Interim Study Committee on Public Health, Behavioral Health, and Human Services to hear testimony concerning the various factors contributing to the growth of health care costs.

Emily Ketterer is a reporter for, a news website powered by Franklin College journalism students.

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One Response to Finance study committee meets to discuss payday lending

  1. Hello, Emily–Enjoyed your reporting on the summer study committee. I was with DFI for 40 years in consumer credit and retired in 2016 as a Deputy Director. I am still involved on the consumer advocacy side at this point. I did watch all of the testimony. Just a clarification, the committee was looking at payday lending options. The article seems to indicate that is all they were interested in. As you know, the committee is actually looking at anything covered by the IUCCC which includes all consumer purpose credit sales and consumer loans including second lien mortgages, but excluding first lien. First lien mortgage loans are covered in a separate article of the law. Your column mentioned Lyndsay Miller’s comments about licensing for small loans. Just to clarify, small single pay loans are licensed now and any new installment payday loans would also be required to be licensed. Lyndsay was referring to consumer credit sales and/or leases of goods or services. These are now covered under the law, but these entities are just required to “register” with DFI versus go thru a licensing approval. Just thought I would clarify for possible follow up stories that you might do. I really appreciate all the reporting done by TheStatehouseFile.

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