Morning Fizz

Democratic State AG Schools Democratic Sponsors of Payday Legislation

Caffeinated news featuring payday lending, two-thirds voting, deal making, and driving.

By Josh Feit March 2, 2015

Caffeinated News

1. Washington state attorney general Bob Ferguson has sent a letter to senator Marko Liias (D-21, Mukilteo) and representative Larry Springer (D-45, Kirkland), the state senate and house sponsors respectively of the controversial "installment loan" legislation.  The legislation is intended to replace current emergency high-interest loans known as payday loans with a loan that gives consumers a longer term to avoid "balloon payments" at the end.

The new version, however, allows borrowers to take out more money up front and allows the lender to attach a batch of fees that increase the payments.

Citing 2009 payday reforms passed by liberal state senator Sharon Nelson (D-34, W. Seattle), Ferguson says current law already protects consumers with an installment option. 

Spelling out the extra costs embedded in the new installment loan legislation, Ferguson's letter states:

A borrower in Washington already has the option to convert his or her payday loan into an installment loan if they are unable to satisfy the loan in full at payday. Lenders are required to inform the borrower of the installment option ... Under  current law, when a traditional payday loan “balloon payment”  is due, a borrower may request an installment plan and the lender must allow an installment plan of up to 180 dqys. Importantly, the lender cannot add additional fees or charges to the debt.

The proposed bill will substantially raise the cost for consumers for a small installment loan compared to the current system.  For example, under the current system if a borrower takes out a payday loan for $700, they would pay a maximum origination fee of $95 (15% on first $500 and 10% on amount over $500).  If they request an installment plan under the current system, they will have up to six months to pay—and their total repayment would remain $795 (principal plus origination fee).

By contrast, the proposed system would impose additional costs and fees on a borrower. On the same $700 loan for 6 months, a borrower would pay 36% interest, a 15% origination fee, and a 7.5% monthly maintenance fee (capped at $60).  If.the borrower took the entire six months to pay the loan, the new system would allow an origination fee of $105, a total of $315 in six months of monthly maintenance fee, and $75.31 in interest. The total repayment would be over $1,195. In short, the new system would cost this consumer an additional $400.

Seattle state representatives Eric Pettigrew (D-37, SE Seattle), Sharon Tamiko Santos (D-37, SE Seattle), and Gael Tarleton (D-36, Ballard) have signed on to the legislation. No Seattle senators have.

2. In case you missed it: Late Friday, the state senate Democrats prevented the Republicans from passing a transportation package that simultaneously guts environmental regulations, low-balls Sound Transit's budget, and skimps on alternative transportation, by forcing the Republicans to play by their own rules. Literally.

On the first day of the session this year, the GOP-controlled senate passed a procedural rule requiring a two-thirds vote to bring a tax increase to the floor; it was the Republicans' way of getting around a 2013 Washington state supreme court ruling that said the two-thirds rule to pass taxes was unconstitutional.

When they passed the new rule (by a simple majority), the Republicans said it only applied to "new" taxes.

The question state senator Annette Cleveland (D-49, Vancouver) asked on Friday afternoon as the gas tax for new roads was careening toward a floor vote, after several Democratic amendments (don't raid the general fund) failed and several Republican amendments (limit environmental review on permitting) passed, was this: Didn't the tax that the GOP was okay with also require a two-thirds vote?

Lt. governor Brad Owen, the president of the senate, was expected to rule on the question today.

This morning, referring to the Republicans' assertion that Governor Inslee's carbon tax was a "new" tax while the gas tax was not, Governor Inslee's communications director David Postman sent out the following email:

On their first day in control, Republicans changed the Senate’s rules to require a two-thirds vote for any new tax. This was largely reported as an impediment to the governor’s plans for a carbon charge and a capital gains tax on less than 1 percent of Washingtonians.
The current debate in the Senate shines a light on what that rule change really means. It is protection for the state’s wealthiest individuals and largest and most powerful corporations.
Under the GOP interpretation of the rule, the Senate needs just 25 votes to raise the gas tax on millions of Washingtonians.
But to adopt a carbon charge on about 130 of the state’s top polluters — raising about the same amount of money as the gas tax would – would take 30 votes.
Why are Republicans more worried about requiring oil companies, pulp mills and refineries to pay more than about increasing the gas tax for every driver in Washington?
The same is true on the operating side. To raise the sales tax, property tax or B&O tax, Senate Republicans would need 25 votes.
To raise the capital gains tax — a tax on investments of the wealthiest Washingtonians — would take 30 votes.
Again, why do the wealthiest — less than 1 percent of the state — deserve more protection than every working man and woman in Washington?
The rule change was a flawed policy when it was adopted on the first day of Republican control. The transportation debate, I hope, is showing the double standard Republicans have imposed.

3.  Developers, objecting to the idea of the linkage fee that city council passed late last year which presumes a link between new development and the loss of affordable housing, have been arguing that the fairest way to fund affordable housing is through the housing levy (a property tax).

They'd also like to see the city build housing on public land. The idea may have created some common ground between developer Vulcan and socialist city council member Kshama Sawant. The two sides are now talking about an unprecedented meeting.

4. Yesterday's Sunday New York Times featured a story on Metro's new low-income farea discounted fare for people making up to 200 percent of the federal poverty level (or about $23,000 for an individual). 

Last year's Seattle vote to increase property taxes for Metro funding with a 0.1 percent sales tax increase and a $60 vehicle license fee set aside about $3 million to help fund outreach at community centers and social service programs to sign people up for the reduced fare ($1.50).

One gripe about the piece. It came with this line: "The reality of public transportation in America is that almost all of it is heavily subsidized by government."

Articles about cars never feel compelled to provide the same bit of context about public subsidies for cars.

As I reported just last week, for example, Sound Transit is building a new parking garage at Northgate. Meanwhile, the city provides discounted parking all over downtown.


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