Kaitlin Lange and Tony Cook | IndyStar

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Tim Evans

Payday lenders could charge interest on small loans at rates more than triple what Indiana law currently defines as criminal loansharking under a bill the Indiana House approved this week.

The House on Wednesday narrowly passed House Bill 1319, which would allow storefront lenders to offer three to 12-month loans of $605 to $1,500 with annual percentage rates up to 222 percent.

Under current Indiana law, rates of more than 72 percent are considered felony loansharking. Payday lenders can offer higher rates, but only for smaller loans.

The House passed the measure after Speaker Brian Bosma, who rarely votes on legislation, joined 52 other representatives in supporting the bill, despite his own church's opposition. The bill now moves to the Senate.

"Some (GOP lawmakers) had had political concern about it, that it had some political ramifications for them in their home districts and occasionally I will cast a vote on something like that so they’re not left dangling in the wind themselves," Bosma said.

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The vote comes after intense lobbying by payday lenders, who have hired several lobbying firms including those of two former Republican lawmakers who served with Bosma — Matt Whetstone and Matt Bell.

The payday loan industry argues that the new, unsecured loans will fill a niche not served by conventional lenders, helping customers short on cash and credit who have nowhere else to turn.

But opponents argue that such high-interest loan products are predatory, ensnaring cash-strapped borrowers and sending them into a death spiral of debt.

Those opponents include social service charities, the state's four largest veterans organizations and a large number of religious groups — including Grace Church, where Bosma attends and sometimes serves as an usher.

Opponents have managed to kill bills in the past that would have created additional high-APR loan options. But this year, opponents say it seems like there is more lobbying power from the payday loan industry.

"It feels like this year it’s like an army," said Erin Macey, a policy analyst for the Indiana Institute for Working Families. "Anytime we push out one narrative, they’ve found another one."

Four large payday lenders, including Advance America and Check into Cash, spent more than $186,000 on lobbying at the Statehouse last year, according to lobby registration records.

Industry representatives argue there is a greater need this year for a new type of loan because of new Consumer Financial Protection Bureau rules created during the Obama administration.

"The net efect of this is that payday loans will become obsolete in most part when it becomes effective next summer," said Sabra Northam, representing the Community Financial Services Agency. "The impact of this rule is that the consumers that our association serves today will have to turn to the unregulated market."

The future of those rules, however, have fallen into limbo under President Donald Trump, who has been critical of the CFPB. The agency announced last month it's rethinking the rules, which would have required lenders to determine upfront whether people can afford to repay their loans.

Bill author Rep. Martin Carbaugh, an accountant and Fort Wayne Republican, said the new loan product would provide borrowers with an additional avenue to build up their credit score.

“We have a demand problem and we have a need for these things," Carbaugh said.

Supporters say the bill includes some protections as well. For example, the proposal prohibits the loans if the monthly payments exceed 20 percent of the borrower's monthly income.

Opponents say those terms would trap low-income Hoosiers into borrowing money they can't easily pay back.

That means borrowers would have to earn about $23,800 a year to qualify for a six-month, $1,500 loan. By the end of the loan, that borrower would end up paying $2,378, according to an analysis by the Indiana Institute for Working Families.

"I’m all for helping people, but this bill is helping no one but the companies that are going to benefit from these high interest rate," said Rep. Robin Shackleford, D-Indianapolis.

Bosma stood by his vote and said he was unaware that his church had taken a position on the matter.

"Our church family of course has to take a position that they think is appropriate, and I have to do what I believe is comfortable as a policy maker," Bosma said Wednesday. "It wouldn’t be the first time that I’ve disagreed with the folks at my church before."