It’s official, Delawareans can only take out five payday loans in any given year.
Gov. Jack Markell, (D-Del), signed legislation, Wednesday, that limits borrowers to five short term consumer loans of $1,000 or less in a 12-month period, including rollovers or refinancing.
“We recognize some people need immediate access to an immediate loan. This bill maintains that choice,” Gov. Markell said. “Instead of a financial hand up, though, repeated use of these loans can become a set of financial handcuffs.”
Payday loans are typically small stopgap loans to carry a borrower through to his or her next payday. Until now, individuals could take out any number of payday loans, but House Bill 289’s lead sponsor, Rep. Helene Keeley, (D-Wilmington South), says with annual percentage rates on some of these short term loans running in excess of 400 percent, defaulting is only a matter of time.
“People who regularly take out or roll over payday loans are in untenable financial situations and desperately need relief,” said Rep. Keeley. “This bill will hopefully help break that cycle and put people back on the right path.”
The bill also creates a database to track the number of payday loans a person has obtained. The state banking commissioner’s office would be required to provide the General Assembly with a report on the prevalence and nature of payday loans.
Last year, the state Justice of Peace Court system reported payday lenders filed more than 2,400 cases for payday loan defaults.
“First” ran a story about payday loans in May. Watch below and hear from both sides.