Washington State passed tough restrictions on payday lenders in 2009. Now some Democrats want to roll back those reforms. (Shockingly, those same Democrats have received campaign donations from payday lenders.)
Washington State passed tough restrictions on payday lenders in 2009. Now some Democrats want to roll back those reforms. (Shockingly, those same Democrats have received campaign donations from payday lenders.) Thinglass / Shutterstock.com

A controversial bill backed by Seattle-based payday lender Moneytree took another step closer to becoming law Tuesday after the state senate approved an amended version of the measure 30-18.

The tweaked proposal would scrap the traditional payday loan system in Washington in favor of a “small consumer installment loan” scheme that would let lenders issue 6-month loans up to $700 with effective interest rates around 196 percent, according to an analysis by the Department of Financial Institutions.

Critics of the proposal put up a lengthy battle Tuesday night, introducing 37 amendments aimed at cutting loan costs for borrowers. In the end, all but a few were rejected as the bill’s prime sponsor, Sen. Marko Liias, D-Lynnwood, said the high fees were necessary because of the high cost of lending. (Liias is among the many Democrats who have received campaign donations from Moneytree, with executives from the company giving him a total of $3,800.)

“This is a segment of the market where the default rate is higher than for other financial segments,” Liaas said. “It’s also part of the market where there’s no collateral required for these loans.”

Sen. Pramila Jayapal, D-Seattle, argued the fees are too steep to be justified.

“I worked for an investment bank,” Jayapal said. “I have a Master’s in business and I ran a loan fund that made loans in other countries to organizations who had no collateral. We did not use that as an opportunity to tack on additional fees. We were trying to ensure that we providing much needed credit at higher interest rates...but we did not then take advantage of people who couldn't get credit by continuing to add on fee after fee after fee. That is not good public policy. It’s not good for working families.”

All but one Republican joined Liias and five other Democrats in approving the measure, which now heads to the Democrat-controlled house.