The Senate Commerce and Labor Committee was urged Saturday to regulate companies that offer people a loan to cover expenses while awaiting their eventual settlement from insurance companies.
Senate Minority Leader Michael Roberson, R-Las Vegas, said many of those companies claim they are exempt even from the 40 percent interest rate in statute for those kinds of loans and charge customers well over 100 percent.
“Payday loan companies are regulated. Title loan companies are regulated,” Roberson said. “This industry is not regulated.”
His original version of Senate Bill 361 would have simply put those companies out of business by declaring any loan based on the eventual proceeds from a lawsuit to be an unfair lending practice. He said the proposed amendment would instead set up regulations to control loans.
Roberson said the example proving the need is that of a woman who borrowed some $50,000 to get her through the period before she received a settlement and ended up owing about $850,000 to the loan company.
“That’s outrageous,” he said.
Opponents argued all the legislation would do is take an option away from consumers and force them to basically take the insurance company’s first offer of settlement instead of what they deserve.
In addition, some of those companies have declared they aren’t bound by the 40 percent cap or any other state regulations because they aren’t making loans. Instead, they describe their contract as a purchase agreement where they are buying a portion of the eventual settlement.
Roberson said SB361 as amended would make it clear those companies are regulated and cap the interest rate they can charge people at 24 percent — about what banks now charge for most credit cards.
He said the issue doesn’t need to be studied until the next legislative session.
“I encourage the committee to look at regulating this practice this session,” Roberson said.
The committee took no action on the measure, which still must be formally amended.