A Message From Seeking Rents

High-interest lenders targeting low-income borrowers want Florida lawmakers to let them double their interest rates

The lending companies just gave $100,000 to Republican leaders in Tallahassee — and $25,000 to Democratic leaders, too.

This is Seeking Rents, a newsletter and podcast devoted to producing original journalism — and lifting up the journalism of others — that examines the many ways that businesses influence public policy across Florida, written by Jason Garcia. Seeking Rents is free to all. But please consider a voluntary paid subscription, if you can afford one, to help support our work.

A group of high-interest loan companies that target low- and middle-income consumers want to charge even higher interest rates.

The companies, working through a front group called the Florida Financial Services Association, are planning to lobby the state Legislature after the elections to pass a bill that would nearly double the maximum interest rate they can charge their customers.

They are already trying to curry favor with key people in Tallahassee. Records show a political committee controlled by the Florida Financial Services Association gave $100,000 last month to top Republican lawmakers — including $50,000 to a fund controlled by incoming House Speaker Paul Renner, a Republican from Jacksonville, and $50,000 to a fund controlled by incoming Senate President Kathleen Passidomo, a Republican from Naples.

The companies are trying to ingratiate themselves with Democratic leaders, too. The association’s political committee also gave $25,000 last month to the Florida Democratic Party.

Florida law generally prohibits anyone from charging more than 18 percent interest on a loan. Anything above that is considered “usury,” and that’s a felony.

But there are several carveouts to this limit, including one for companies that make consumer loans of $25,000 or less — the kind of loans peddled primarily to borrowers with poor credit histories who might not be able to get a better loan from a bank or credit union.

Under that carveout for consumer finance loans, a lender can charge 30 percent interest on the first $3,000 of a loan; 24 percent interest on any amount between $3,000 and $4,000; and 18 percent on any remaining amount up to $25,000.

The companies behind the Florida Financial Services Association — which include OneMain Holdings Inc., Oportun Financial Corp. and Mariner Finance LLC — want the Legislature to rewrite that law to let them charge 36 percent interest. And they want to charge that 36 percent on the entire amount of the loan.

That’s an awful idea, said Alice Vickers, a longtime advocate for low- and middle-income Floridians and the former director of the Florida Alliance for Consumer Protection.

“A loan could be made at $25,000 at 36 percent interest rate, which is atrocious,” Vickers said. “You never want to see consumers be furthered burdened with an even higher carveout from the usury rate.”

The lending companies argue that the current interest-rate caps — which were last increased in 2013 — are outdated, and that they deter companies from expanding in Florida. They say this leads to so-called “lending deserts” where it can be harder for lower-income folks to find loans.

“Currently, there are overly restrictive limits on installment loan rates, limiting access and availability to customers in need,” said Scott Jenkins, a lobbyist for the Florida Financial Services Association. “Modernizing the allowable rate and fee structures for installment loans will promote this access.”

But these companies already do quite a bit of lending in Florida under the current limits.

For instance, Florida borrowers owed nearly $1.2 billion to industry giant OneMain at the end of 2021, according to the company’s investor filings. Florida borrowers owed another $159 million to Oportun, according to that company’s investor filings.

And advocates for borrowers are leery of further unshackling an industry that is notorious for preying on vulnerable customers who are often caught in a financial emergency, like a broken-down car that they need to have fixed so they can get to work.

The tactics can include “insurance packing,” in which expensive insurance policies are added to loans often without the customer’s knowledge, and loan “flipping,” in which customers are talked into repeated refinancings that generate excessive fees.

Some installment lenders also become aggressive litigators when their customers fall behind on payments. Separate investigations published in 2020 by the Guardian and ProPublica/The Texas Tribune found that Oportun filed more lawsuits than almost any other debt collector in Texas or California.

Both OneMain and Oportun are currently under investigation by the U.S. Consumer Financial Protection Bureau, according to disclosures each company has made to its investors.

Another big installment lender — Mariner Finance — was sued in federal court this summer by five states and the District of Columbia, who accuse the company of predatory and fraudulent behavior. The suit followed an investigation by the Washington Post that found Mariner was hooking customers into high-interest loans by mass-mailing live checks and pocketing millions in extra fees by charging borrowers for insurance policies of “questionable value.”

In a written statement, Mariner founder and CEO Josh Johnson said the states’ allegations “are based on minimal consumer interviews, the details of which were never shared with Mariner, and reflect a misunderstanding of the law, or simply a decision to ignore any evidence which negates their claims.” The company has vowed to “vigorously defend itself.”

(The growth of these installment-loan companies, by the way, has been supercharged by investments from some of the nation’s biggest-private equity firms such as Warburg Pincus and Apollo Global Management — much like other giant private-equity firms have been buying up mobile-home communities and sharply raising rent on their largely captive customers.)

At a minimum, Vickers and other consumer advocates say, any changes to Florida’s interest-rate limits should be paired with much stronger protections for borrowers — such as bans on insurance add-ons and other ancillary products that can make these loans far more expensive than customers may realize.

Ultimately, though, if the goal here really is to provide more financial support to low- and middle-income Floridians, then there are far better ways to accomplish that than by simply letting lenders jack up interest rates. Policymakers could, for instance, incentivize or compel traditional banks or credit unions to do more low-income lending.

Or more significantly, they could enact policies that actually help low- and middle-income folks build and maintain wealth.

Florida could expand Medicaid so that more people have health insurance, can afford preventative care, and aren’t financially ruined by a medical emergency. It could improve state unemployment benefits that are currently among the worst in the nation, so that workers don’t immediately lose everything if they’re laid off. It could build more affordable housing and strengthen eviction protections; reform a tax system that makes low- and middle-income families pay a much larger share of the tax burden than the wealthiest Floridians; and allow local communities to raise the minimum wage, if they want to.

“What we have to do is elevate wages and job opportunities to try to raise people up,” Vickers said. “Getting these kinds of loans is not the answer to that problem.”