House members gave preliminary approval Tuesday to a bill that would raise interest rates for most consumer finance loans.
The 74-42 vote was tighter than the 39-9 margin previously managed by the Senate version of the bill, even though a House committee amended the measure last week to make it more palatable to critics.
The amended bill calls for lower interest rates than prior versions, which led two consumer advocacy groups that had opposed the bill to change their stance to neutral. But Rep. Susan Fisher, an Asheville Democrat, argued Tuesday that Attorney General Roy Cooper and AARP remain opposed to the bill because the costs to consumers remain too high.
“These loans are loaded with expensive credit insurance products,” said Fisher. She added that the industry encourages consumers to refinance loans rather than pay them off, which creates a cycle of debt.
Supporters argued that consumers with poor credit scores rely on consumer finance loans from companies such as OneMain Financial and Springleaf when they are short on cash – and that the interest rates the industry is allowed to charge have remained the same for three decades.
“None of us would ever consider telling a Wal-Mart or a Target or a Costco that they couldn’t raise their prices for 30 years,” said Rep. Ken Goodmon, a Democrat from Rockingham.
The bill, which requires a final vote before returning to the Senate to resolve differences, calls for a 30 percent interest rate on loans of up to $4,000. For larger loans, a blended rate applies: 30 percent for the first $4,000, 24 percent for the next $4,000 and 18 percent for the next $2,000.
The bill also would raise the cap on consumer loans from $10,000 to $15,000. Loans of $10,001 or more would carry a flat 18 percent interest rate for the entire amount.
A bill that would have raised interest rates on consumer finance loans was passed by the House in 2011 but stalled in the Senate.
Democracy North Carolina, a campaign finance watchdog, reports that the consumer finance industry has stepped up its donations to legislators in recent years.
Since January 2010 the industry has donated more than $450,000 to campaigns, according to the organization. House Speaker Tom Tillis attracted the most donations during that span: $50,612.