DeSantis nixes proposed increase to maximum interest rates on consumer loans

by | Jun 27, 2023

  • Gov. Ron DeSantis vetoed legislation that aimed to increase the maximum permitted interest rate on consumer finance loans in Florida from 30 to 36 percent.
  • The bill would have removed the tiered interest structure and required licensees to submit annual reports to the Florida Office of Financial Regulation.
  • DeSantis expressed concerns about the potential increase in consumer indebtedness and its impact on inflation, outweighing the bill’s other provisions related to licensing and transparency.
  • The legislation received support from lending and title-transfer companies as well as AARP, while there was a rare party crossover in the Senate vote, with a pair of Republicans voting against the bill and two Democrats in favor.

Gov. Ron DeSantis vetoed legislation on Monday night that, if adopted, would have amended the Florida Consumer Finance Act to permit an increase to the maximum permitted interest rate on consumer finance loans.

The bill, HB 1267, introduced by Rep. Juan Fernandez-Barquin, established an increase to the maximum interest rate for a consumer finance loan from 30 to 36 percent, removing the tiered interest structure altogether, and requiring annual submission of reports to the Florida Office of Financial Regulation (OFR) by licensees.

Under current state law, companies are permitted to apply a tiered interest rate structure to both secured and unsecured loans. As is, interest rates may reach a maximum of 30 percent on the initial $3,000 of principal, 24 percent on principal amounts between $3,000 and $4,000, and 18 percent on principal amounts ranging from $4,000 to $25,000.

In a written order, DeSantis contended that despite harboring elements that would bring consumer finance regulation in line with contemporary demands, the risk of additional consumer debt looms too risky for the state to approve of.

“This increase in rates may result in additional consumer indebtedness and could exacerbate the pinch already being felt due to federal government-induced inflation,” wrote the governor in his statement of veto. “While the bill contains additional provisions that modernize the licensing process for branch locations and institutes transparency requirements, the increase in the interest rate outweighs the bill’s remaining provisions.”

Lobbying databases show that lending and title-transfer parent companies such as TMX Finance of Florida and Oportun, as well as AARP lobbied in favor of the measure. Attempts to make contact with the Executive Office of the Governor for further details regarding the veto went unanswered.

The Senate floor vote on the measure saw rare party crossover, with Republicans Blaise Ingoglia and Ileana Garcia voting against the bill, while Democrats Jason Pizzo and Linda Stewart voted in favor. The bill ultimately passed the Senate by a 22 to 9 margin. In the House, the legislation was cleared with a 96 to 18 vote count mostly along party lines.

On the House floor, Fernandez-Barquin targeted online lenders not bound by federal law, which he stated results in consumer loans with interest rates exceeding 200 percent. According to the representative, 45 percent of Florida’s consumer finance loans are facilitated by approximately 15 lenders.

“Online lenders are offering rates as high as 225 percent to Floridians with minimums as high as 99 percent,” said Fernandez-Barquin. “In 2022 alone there were 317,000 loans, totaling $3.006 billion. This bill seeks to help Floridians with obtaining and managing consumer loans.”

Appearing before the House Insurance & Banking Subcommittee in March, Fernandez-Barquin stated that his legislation sought to expand the base of individuals deemed eligible for consumer loans.

“Our constituents can currently go online and get loans for astronomical APRs,”  said Fernandez-Barquin. “Right now, these individuals who are unbanked are more than likely using illicit funds from an illegal vendor – what I would call a loan shark. This bill will widen the number of people who qualify and would otherwise be subjected to higher APRs.”

He also claimed that rising inflation rates are making it increasingly difficult for consumers to obtain loans. Per his statement to the subcommittee, inflation makes the cost of borrowing more expensive, which he stated affects people’s ability to pay back loans.

“The increase in interest rates have now made people that would have otherwise capable of qualifying for these loans … now not so much, because of these interest rates,” Fernandez-Barquin said. “This bill also includes certain reporting requirements that are not currently in the statute.”


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