June 16, 2006 – A bill removing the interest rate ceiling for small loans, changing the formula for determining how interest rates are set and giving the authority to regulate interest rates to the Division of Banking and Insurance is "premature" and does not serve the interest of the consumer or the financing industry, testifiers said at a Government Operations and Consumer Protection Committee meeting Friday.
Banking and Insurance Director Deverita Sturdivant explained that the bill would disenfranchise the consumer by removing the "ceiling" for interest rates "without removing the floor"; while Cassan Pancham, president of FirstExpress, a small loan company, said the bill would affect financing institutions by giving the power to set interest rates to the "regulator" without setting up "safeguards" for small loan companies.
Pancham explained that interest rates set by Banking and Insurance are based on a formula which imposes a minimum rate of 19.5 percent and a maximum of 26 percent. A high interest rate, he said, opens up more opportunities for individuals who do not otherwise qualify for small loans and works to offset the losses and cost-of-fund increases incurred by small loan companies.
He said that by removing the ceiling, there's no way to insure that Banking and Insurance, as the regulatory agency, would set an "appropriate rate" which could yield enough profit "to cover the losses [incurred]."
After the meeting, Pancham said that financing institutions should be able to set a range of rates which would balance the costs incurred by small loan companies with the interests of the consumer.
Attorney George Dudley, representing FirstExpress and CommoLoco (another small loan company) said an alternative proposal should be developed by the "end of the summer."
However, testifiers said they had no concerns with the other provision in the bill, which increases the amount a borrower could get from a small loan company from $7,500 to $9,500.
Senators voted to hold the bill in committee until the "alternate proposal" was presented.
In other news, senators approved a bill which creates a "living will" for vehicle owners.
According to Sen. Louis P. Hill, the bill's sponsor, the measure allows "a survivor to assume the title of a vehicle upon the passing of a loved one." During the meeting, Hill said the law is currently "silent" on how to deal with "transfers upon death," forcing residents to go through a "long process" of obtaining the title of vehicle once the owner has passed away.
Attorney Terri Griffiths, the author of the bill, said the bill saves residents "quite a bit of money" in attorney fees and further relieves survivors of liability once a vehicle is transferred.
In response to a question from Sen. Terrence "Positive" Nelson, Griffiths said, "This does not deal with ownership. You can't be sued, for example, if I put your name on my title as a beneficiary without your knowing, then get into an accident. If that situation occurs, then some lawyer may want to find a way to sue you. This bill relieves you of that liability because putting your name on the title doesn't mean that you own the car."
However, she said that if the car has a lien placed on it, then the beneficiary is still responsible for "extinguishing" that lien.
She said the bill also provides for multiple owners, persons with disabilities and military personnel.
Adding to Griffiths' testimony, Jerris T. Browne, director of the Motor Vehicle Bureau, said the "bill is more of a positive than a negative." He said that since a law has not yet been established to deal with such matters, MVB has had to make "a lot of judgments" when dealing with the transfer of vehicles.
Browne also suggested senators include amendments to the bill allowing the MVB director to regulate certificates of title, establish and increase vehicle fees and hire peace officers to enforce the bureau's laws.
He said such powers were not transferred when the bureau was severed from the police department.
Present during Friday's meeting were Sens. Roosevelt C. David, Adlah "Foncie" Donastorg, Louis P. Hill, Shawn-Michael Malone, and Terrence "Positive" Nelson, along with noncommittee members Sen. Liston Davis and Celestino A. White Sr.
Sens. Craig W. Barshinger and Ronald E. Russell were absent.
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