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Senate Approves Bill Creating New Short-Term Loan Critics Call "Predatory"

The state Senate approved a bill Thursday creating short-term loans known as “small loans.”

House Bill 1913 allows installment loans up to $1,500 either in a single loan or in total across multiple loans. Lenders can charge up to 17 percent interest per month, and terms are capped at 12 months.

Opponents say the finance charges on small loans end up being three to four times those allowed on installment loans known as "B loans" currently authorized by state law. In 2014, there were 77 consumer loans taken out for every 100 Oklahoma adults.

Sen. Micheal Bergstrom said lawmakers are helping lenders who target the poor and the desperate.

Let's not put another predatory loan product on the market. Let's start looking at getting rid of the other predatory loans," Bergstrom said.

Sen. James Leewright said small loans are necessary because the Consumer Financial Protection Bureau is moving to do away with payday loans.

You have to think, 'Am I willing to decimate an industry if [CFPB] does away with paydays and we don't have a better product in place? Will my constituents have to go to predatory loans like the tribal and the offshore lenders if this mechanism isn't in place?'" Leewright said.

The AARP is among several organizations opposing small loans. Leewright said it’s because they’re competition.

"They have a credit card that offers a cash advance at a almost 30 percent interest rate with large fees," Leewright said.

HB1913 passed the Senate 28–16 and has been sent to the governor's desk.

Correction: Sen. James Leewright was misidentified as Sen. Greg Treat in the original version of this story.

Matt Trotter joined KWGS as a reporter in 2013. Before coming to Public Radio Tulsa, he was the investigative producer at KJRH. His freelance work has appeared in the Los Angeles Times and on MSNBC and CNN.