By the authority vested in me, pursuant to part II, Article 44 of the New Hampshire Constitution, on July 6, 2011, I vetoed SB 57, relative to regulation of title loan lenders.
I am vetoing this legislation because legalizing excessive interest rates for title loans - rates of 300 percent APR - would be detrimental to our families, our communities, and to our economy.
Thirty-one other states - including all the other New England states - ban these types of excessive interest rates. In 2006, Congress passed and former President George W. Bush signed federal legislation capping the interest rate on title loans to members of the military at 36 percent APR. In addition, SB 57 was strongly opposed by large numbers of Republicans and Democrats in the legislature, the New Hampshire Local Welfare Administrator's Association, AARP, the Banking Department, the Department of Justice, the New Hampshire Community Loan Fund and New Hampshire Legal Assistance.
In 2008, bipartisan legislation supported by the Banking Department, the former Attorney General, communities and many others, capped interest rates on title and payday loans at 36 percent APR. That change was reasonable and well thought-out. There is no evidence that reversing that law would benefit New Hampshire. On the contrary, there is significant evidence that it would harm our state and families.
New Hampshire currently caps interest rates for title loans at 36 percent APR. This legislation would have allowed significantly higher interest rates for loans made against the title of a car. For example, under this bill, a family who took out a $500 loan against their car would pay $1,187 in principal and interest over the maximum 10-month life of the loan. At the same time, companies would be allowed to loan without any inquiry into a borrower's ability to repay the loan and would even be allowed to loan to people receiving local welfare assistance.
Failure to repay a loan could lead to seizure of the family car, which is often essential for family members to maintain employment.
For vulnerable families, these excessive interest charges could force them further into a cycle of debt, and potentially onto public assistance. The New Hampshire Local Welfare Administrator's Association said the "temporary relief" that may come from a title loan "often comes at the cost of enslaving recipients in a cycle of increasing debt for basic needs, causing an ultimate crash and the need to come to the legal welfare office." Frequently, the welfare administrators said, families end up worse off than before they took out the loan.
That cycle of debt hurts our families, hurts our local communities, and ultimately our economy. Therefore, I am vetoing SB57.