A measure aimed at reining in Hawaii payday loans that can reach as high as 459 percent APR has been stripped of its new proposed cap of 36 percent, despite a legislator’s assurance that wouldn’t happen.

The House passed Senate Bill 737 on Tuesday. The latest draft of the measure — amended by Rep. Sylvia Luke, chair of the House Finance Committee — would simply add more oversight to payday lending companies, rather than limit how much they can charge for small loans.

Advocates for more regulation say the current rate cap of 459 percent is far too high and allows predatory lenders to take advantage of low-income residents. Sen. Rosalyn Baker originally introduced SB 737 to cap the APR at 36 percent, in line with federal regulations for active military service members and their families.

Payday lending shop next to 7-11 in Waianae.  21 march 2015. photograph Cory Lum/Civil Beat

Payday lending companies say that they offer a much-needed service to consumers, and will go out of business if their interest rates are capped at 36 percent APR.

Cory Lum/Civil Beat

“Your Committee has amended this measure by removing the annual percentage rate cap for the deferred deposit of a personal check,” the House Finance Committee report read.

But that’s not what Luke said when she described the amendments to SB 737 during a hearing April 8, a few days before the committee report was released.

She specifically announced to the hearing room that she’d be adding enforcement language and technical amendments while preserving the cap.

The committee passed the bill unanimously, and the House did so on Tuesday as well. The Senate will vote later this week whether to accept or reject the House version. If the Senate disagrees with the House, the bill will go to conference committee.

The absence of a limit on the annual percentage rate defies the original purpose of the bill, and worries advocates who celebrated after last week’s hearing when they thought it had been included.

“All of us that watched the hearing either in person or on the livestream who heard the vote, we hope that there’s still an opportunity to fix the bill,” said Kim Harman from the community group Faith Action for Community Equity.

Luke did not reply to requests for comment Tuesday.

Click here to read more about payday lending in Hawaii.

You can watch the hearing for yourself here:

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