On February 13, Christopher Peterson, professor of law at the S.J. Quinney College of Law, testified in the Montana State Legislature and appeared on Montana public television voicing support for legislation that caps interest rates on Montana payday loans. Payday lenders provide high cost loans to consumers with marginal credit history. Critics of the practice argue that average interest rates of about 450 percent create spiraling debt obligations that are damaging to low and middle-income families.
Peterson testified in two hearings conducted by the Senate Committee on Business, Labor and Economic Affairs and the House of Representatives Committee on Business and Labor. Current Montana law allows payday lenders to recoup 25 percent of a loan principal within the first week or two an outstanding payday loan. For a typical payday loan this amounts to an interest rate limit of approximately 650 percent. Legislation under consideration in both the Montana Senate and House would cap interest rates with a simple nominal annual interest rate of 36 percent.
Peterson’s past research on the national payday lending industry found that Montana legislative districts have among the highest concentration of payday lending locations, relative to population, in the entire country. Moreover, among states that limit the price of payday loans, Montana currently has the second highest price cap in the nation.
On February 12, Peterson also appeared on a half-hour public television public affairs program discussing high cost credit issues. Hosted by Linda Reed, the President of the Montana Community Foundation, the program aired on Helena Civic Television. Regarding Peterson’s visit, Ms. Reed said, “Having Professor Peterson here was like an intensive course in predatory lending. Our understanding of the circumstances giving rise to this industry is deeper and our intuitions about controlling the negative impacts on low income Montanans are better informed.”