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Washington lawmakers approve greater predatory loan protections

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Eric Tegethoff

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(Washington News Service) Lawmakers in Olympia, Washington, this session moved to add more protections for consumers against predatory loans.

Washington state lawmakers passed Senate Bill 6025 unanimously in both chambers, closing a loophole companies were using to evade caps on the amount of interest charged on loans.

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Sam Leonard, an attorney in Seattle, said tech companies providing financial services such as loans would charter out of state banks, especially in Utah, where lenders can charge unlimited interest rates.

"These fintech lenders a lot of times will charge 150, 200 percent interest on relatively small dollar loans, $3,000, $5,000 and the like," Leonard explained.

Washington state has a set of protections called the Consumer Loan Act to shield people from predatory loans. Leonard said capping interest rates at the federal level would help people across the country.

However, he emphasized the bill goes a long way to increase protections for Washingtonians.

"Not a lot of states at this time have passed similar legislation," Leonard pointed out. "Washington is out in front of the curve with regard to protecting low-income Washingtonians or other Washingtonians that might enter into these predatory loan products."

Leonard added the issue with predatory loans is they keep people in continuous debt cycles.

"Loan products like these essentially strip low-income individuals' ability to improve their economic situation," Leonard noted.