DOVER, Del.- The Delaware House of Representatives has passed House Bill 289 as the state's first step to monitoring the widespread use of payday loans in the state.
The bill permits a borrower to obtain no more than five payday loans in a 12-month period, changes the definition of short term consumer loan to include loans up to $1,000 rather than $500, and it also creates a database to track the number of loans statewide in Delaware.
The bill comes after officials said people are not paying back the loans as fast as they are intended. A payday loan works when a borrower gets money short term and its secured against your next pay check. Typically, interest is high on payday loans, so the idea is you pay it back fast, but that doesn't always happen.
In Delaware payday loans can have interest rates as high as 565 percent with mandatory minimum fees and consequences for late repayment. Sen. Colin Bonini supports HB 289. He said payday loans may sometimes be necessary, but need to be regulated.
"What's happening to a lot of people is they're getting caught in this constant cycle in payday lending and they're not able to get out of that cycle," Bonini said. "It really ends up hurting them, not just financially, but their family, economically, and the local economy because the money is not getting in."
The bill will go to the Senate next week in Dover.