At issue, SB 874 would create a loan product in the Consumer Finance Act called “installment loans.” A loan under this bill would have the following characteristics:
- Between $300 and $10,000.
- A term of at least 120 days, but not for more than 36 months for loans with a principal balance upon origination of at least $300, but not more than $3,000.
- A term of at least 12 months, but not more than 60 months, for a loan with a principal balance upon origination of more than $3,000.
- 36%, 30%, 24% tiered interest rate.
- Origination fee of lessor of $90 or 6% of the principal.
- Access Partners are not licensed or regulated by any state agency.
- Underwriting such that monthly debt-to-income (DTI) payments could not exceed 50% of gross monthly income for loans up to $3000, 36% for loans over $3000 with no consideration of the borrower’s living expenses.
- No determination of borrower’s ability to repay.
- Mandatory credit reporting
AARP Florida’s primary concerns are that bill allows the increasing rates from what is already allowed and lacks sufficient underwriting protections. Additionally, there is no restriction against add-ons fees, which inevitably will be attached and significantly increase the cost to consumers.
On top of these concerns, SB 874 contains provisions that allow for “Access Partners”. In short, these provisions would allow a licensee to reach an agreement with a business to distribute loan materials and usher a borrower through the loan application process (however, they would not be required even to provide this much assistance), but the access partner would be very limited as to answering any relevant questions about the loan products. Compare this to a kiosk in a local supermarket, where someone could log into the lenders website and sign up for these expensive loans with virtually no guidance other than the provided sales material.
Sound sketchy? It is! Call your senator now and tell them to protect consumers and vote against SB 874. Don’t know who is your state senator? Use this tool to find out.