Industry sign banking kentucky pdf free
meeting of the house standing committee on banking and insurance we got three bills to consider this morning don't see any guests in the room that need to be recognized so at this time adam clerk if you would please call the roll representative bentley yes here in the room representative fisher representative flannery representative flannery here in my office representative frazier representative gooch representative hattan here representative kirk mccormick representative koenig representative cole carney representative lockett here representative mcpherson representative meredith yes representative roberts representative santoro representative smith representative stevenson representative up church here representative westrom vice chair lewis here chairman roland president fraser walked in uh we do have a quorum uh we are authorized to conduct business here in the committee room this morning uh we'll go ahead and get started the first bill for consideration this morning is going to be house bill 48 uh representative bentley uh representative bentley the floor is yours when you're ready introduce yourself and please proceed thank you mr chairman and thank you committee for having me i have one guest on zoom is um president joel thornsbury president of the kpha i think he's in there y'all have good morning yes sir i'm here okay so i'll start uh chairman rowan house bill 48 is an important piece of legislation to ensure the citizens of the commonwealth have access to pharmacists services that can improve health outcomes and lower health care costs each individual in the state of kentucky is within six miles of a pharmacist pharmacists are highly trained health care providers but unfortunately in kentucky they're not compensated for many services they provide unlike other health care providers who get paid for delivering services currently there is no no mechanism for pharmacists to submit claims and receive reimbursement for providing the same care for which other providers are paid this is due to decades long separation of pharmacy benefits like being paved just for the medication from medical benefits which pay for services such as health care provider visits or a rapid flu test or smoking cessation cancer to name a few pharmacists are under their current scope of practice in kentucky to provide many of these services yet are not able to bill for them under house bill 48 insurers and health plans will not be able to deny reimbursement to a pharmacist for providing a service or procedure within the pharmacy scope of practice if that same service or procedure is covered by the plan which provided by a physician advanced practice nurse or a physician assistant motion on the bill representative bentley i got a motion in a second on the bill uh i do have questions you're welcome to proceed or we can we can move forward with the questions i just got two sentences okay house bill 48 is not an expansion of pharmacy scope of practice it establishes a claim submission process that ensures pharmacists are reimbursed for the same services for which care providers are reimbursed health insurers could reimburse a pharmacist just as they reverse other non-physician providers as written this bill applies to commercial insurance plans only and it does not mandate medicaid to pay for pharmacist services thank you mr chairman thank you representative bentley representative hatton did you have a question or comment yes just briefly a comment i wanted to say good morning and welcome to my constituent um mr joel thorne thornsberry who is the president of the kentucky pharmacy association who's joining us by zoom this morning nice to see you i did print some stuff off might want to mute there representative flannery [Laughter] anyway good morning mr thornberry he did come and and speak to me about this bill a couple months ago and i think it's going to be a really important thing for a pharmacist especially as they administer vaccines for covin and things like that so thank you thank you representative lockett commenter question just a couple of questions first of all um i see the financial impact statement that's that's here in our packets from the doi it looks like it's pretty nominal in terms of a rate in increase for premiums can you foresee any other uh cost increases to um to to the person receiving benefits that you could could foresee because of this bill i don't see anything right now no sir we've been doing it for 50 years i'm a pharmacist and i've given away my profession to the people of my area and never charged a stint all these years i mean if you brought in a baby and it was in seizures through the front door i called the doctor and got okay to to administer acetaminophen suppositories so that baby wouldn't die in my arms but i never got a cent for it and i can go on and on so i really don't see this this just gives us a chance to be pharmacists thank you and it is supported by the kpca you all saw the letter in your packet thank you um any other committee members seeking recognition for questions or comments representative smith i want to make a quick comment because i've had a lot of interaction with pharmacists in the last month over this and i co-sponsored it with you because of the local pharmacies i think we need to be aware of what's happening from the federal level to the state level there's a takeover of our pharmacies and our pharmacists and through mail order any means to try to save money for the major corporations to make more money and i want to tell you i appreciate you bringing things to us for the local pharmacists i'm from my independent pharmacies i think they're important i think they're as important as a doctor that prescribes it and sometimes more important because sometimes a doctor overlooks some things so it's a check and balance i appreciate what you do and i thank you for this legislation thank you mr representative smith thank you we do have a motion and a second in front of us on house bill 48 seeing no further comment or questions uh madam secretary please call the roll representative bentley yes representative fisher yes representative flannery yes representative frazier yes representative gooch representative hatton yes representative kirk mccormick yes representative koenig representative carney representative lewis yes representative lockett yes representative mcpherson yes representative meredith yes representative roberts yes representative santoro yes representative smith uh anybody that's on zoom if if you don't mind muting your cameras or i mean muting your microphones until we call on you thanks representative stevenson representative up church yes representative westrom i proudly vote yes and i'm thankful you brought this forward you guys have been undercut for so long and you're so very very important thank you thank you chairman roland yes motion does pass and same should pass on the house floor congratulations representative bentley and thank you for bringing your legislation thank you for the privilege to be in front of your committee mr chairman thank you committee all right we're going to uh next take up house bill 509 and i'm going to go down to the table and turn over the chair to vice chair lewis we will be considering house bill 509 an act regard relating to reorganization chairman please introduce yourself and i guess you may have please proceed thank you mr chairman members of the committee representative bart rowland house district 21 here this morning on behalf of the department of insurance and the public protection cabinet to present to you house bill 509 it's an act relating to reorganization of the department of insurance and we have on zoom with us today i believe both commissioner clark and deputy commissioner dj watson i would let them introduce themselves and let them do most of the explaining on the bill so ladies when you are ready thank you mr chairman and members of the committee i appreciate your attention on this bill it is a uh i know you it's expressions used a lot it's a simple bill but it really is the department is proposing in-house uh bill 509 to divide the division of insurance product regulation back into two divisions which are the health and life insurance managed care and the division of property and casualty and then the second aspect of this we want to just change the title of the division of agent licensing to division of licensing and our reasoning for this is there is no other state or jurisdiction in the country that has that same organizational setup where pnc and health and life are all combined into one huge massive division and the other aspect of it is the department you all might find it interesting that the department has 267 792 licenses as of this morning and they're in 18 categories and the agent licensing is only one of those 18 categories so we want to change that name to division of licensing to make it clear for those who are trying to do business in the states so those are the two aspects of this bill and if there's any questions i would be happy to answer them and i'm sharon clark i'm sorry if i didn't identify myself commissioner department of insurance we do have a motion in a second mr truman would you like to continue we're happy to answer any questions and i'll i'll actually defer those to the commissioner if anybody has any we're happy to take a vote seeing no questions madam secretary please call the realm representative bentley representative fisher yes representative flannery yes representative frazier representative gooch yes representative hatton yes representative kirk mccormick yes representative koenig yes representative cole carney representative lewis yes representative lockett yes representative mcpherson yes representative meredith representative roberts yes representative santoro yeah representative smith representative stevenson representative upchurch yes representative westrom chairman roland having received the majority of votes bill expression of opinion that the same should pass the floor thank you [Music] thank you all right the final bill up for consideration this morning is house bill 259 representative meredith when you're ready introduce yourself uh and any anybody any presenters that you have for your side of the topic this morning representative thank you mr chairman members of the committee uh appreciate the opportunity to be in front of you representative michael meredith representing the 19th house district uh with me uh testifying virtually via zoom is austin clancy i'll let him identify himself real quick good morning hi i'm austin clancy i'm vice president director governor relations for one main financial and the current president of the kentucky financial services association for you all who have been around for a few years we started doing some modernization with regard to consumer finance companies a couple of years ago we gave the department some additional regulatory authority to oversee them and this bill has been talked about for a couple of years now not in its exact form because we have changed some things around we do have a committee substitute and i would ask uh for that committee substitute to be before the committee we need a motion on the committee so i have a motion in a second all those in favor the committee's the committee substitute is a product of us working to try to get some consensus amongst all the groups i don't think we have full consensus but again we were trying to negotiate with everyone in good faith and come up with something that might work for everyone we currently have a structure in the consumer finance space that incentivizes small dollar loans over larger loans you can get up to 36 percent rate apr on a loan from a thousand dollars to three thousand dollars but once you go above that the rate drops down to 24 percent and so these are not depository institutions they're institutions where uh someone has invested funds in or they have borrowed funds to to then re-lend these these funds out and when you're dealing with a limited amount of capital right now the incentive and the structure the way it's set up is to make more 3 000 and below loans instead of making loans above three thousand dollars because again the business model and the rate structure goes goes down that path what this bill will do is allow for a loan up to five thousand dollars to get the 36 rate and then there would be a blended rate above the 5 000 loan so you take away the the the disincentive to make the loans above 3 000 and 5 000 i'll turn it over to austin let him explain a little more in depth about they operate in multiple states and can talk about how this works in other states as well thank you representative meredith and again thank you chairman roland and vice chair lewis for the opportunity to speak on this important bill um as i said before my name is austin clancy i represent one main financial we are the largest national excuse the largest personal installment lender in the country um but i'm also here in my capacity as president of the kentucky financial services association which is made up of five companies one main one main financial landmark financial mariners finance republic finance and um heights financial we represent about 120 branches across the state of kentucky and we specialize in providing access to credit to individuals with less than perfect credit scores and access to credit is really the reason behind this bill and why it is so important today as representative meredith alluded to earlier we've spoken on this issue for multiple years in a row um and just to kind of give you a snapshot of why these this type of win these types of loans are necessary you know right now a recent study by the the federal reserve board indicated that less than 40 of americans have 400 in their personal savings to address financial crisis or emergencies in addition to that 42 percent of americans have a sub 700 credit score meaning that for a lot of those individuals they are unable to attain loans from banks and credit unions and that's not that's not necessarily a criticism on banks and credit unions those as uh representative meredith alluded to earlier those those institutions rely on deposits from consumers in order to uh you know blend out money those individuals so they're not exactly in a position where they can loan money to individuals in this threat in this credit substrata due to the risk that's involved and just to kind of put a pin on that point of that 42 60 million americans have a sub credit score below 620 and so for those individuals finding access to credit can be incredibly challenging um you know you have a lot of folks that wind up having to do things you know make make a lot of sacrifices in order to kind of find credit that's helpful and out there and so for what we try and do as personal installment lenders in the state is we we offer safe affordable high quality credit to individuals and when i when i say that you know our loans they're not anything spectacular or amazing they're basic terms that everyone should be able to get on the loan such as a fixed price so you know the what you're paying what the cost or credit is going to be up front fix payments so those payments will remain steady the entire time there's no balloon there's no balloon payments in that process each payment goes to principal and interest meaning it's fully amortizing so there's no no possibility you'll be able to have a negative amortization process where you won't have the ability to pay down that principle so you won't have something you won't pee up on the loan for years and have nothing to show for it um in addition we all engage in underwriting for our customers meaning we do a full ability to repay analysis on each one of those customers to determine their disposable income and whether this loan fits their budget and as we're fond of saying we are not incentivized to loan money to people that cannot afford it and so our underwriting process is really the hallmark of why um you know we're able to provide credit to this this this demographic of individuals and so by expanding out the interest rates as representative meredith talked about earlier we are able to extend credit further down those fico
ands into the lower fico score individuals to folks that have less than perfect credit or no credit and and and give them the opportunity to meet some of their loan goals and you know our loans typically they the loan purpose is kind of they range pretty widely but for the most part you know debt consolidation is a huge issue for us we have a lot of consumers that come in with high credit card balances as you know those are unstructured loans and so it's very difficult consumers get out of there we will take those loans and refinance them into a more structured payment format so they can get out of the credit card trap um we also you know finance a lot of home repairs we finance a lot of auto repairs and we also finance a lot of things like vacations or just you know uh you know improvements in the backyard just for quality of life this isn't necessarily doom and gloom loan product um you know we're we're out there to kind of provide full financial services for all individuals in this strata um and so i'll just to kind of touch on the idea of kentucky in a snapshot you know as representative meredith alluded to earlier the mark the marketplace has been artificially bifurcated by the current loan format excuse me the current rate format which basically disincentivizes lending above three thousand dollars in state and so there many other states don't necessarily have rate structures like that and so moving to a blended rate structure allows for a more even flow of the credit or risk grades up up down the chain excuse me to allow for us to appropriately underwrite individuals what that means is that people at the bottom end of the credit spectrum that can't get loans right now will have access to loan offers people that are already in the spectrum will that are already getting loan offers will likely get loan offers that are more affordable because of the competition this will create um and so and just again for kentucky as a snapshot you know the the new york fed released a study in 2019 which rated american counties um in terms of their their brother whether their credit at risk or credit insecure meaning that individuals have the ability to go out in their communities to find access to credit and get it at the amounts that they need at the prices they could afford and the payment they could afford and from that study what was discovered was that 61 counties in kentucky are rated as credit at risk or credit insecure meaning that consumers in those counties don't have access to loans in the space that we're talking about here and so by we it's our it's our belief that by modernizing the rate structure in the state we will expand that access to credit out to individuals who have no no ability to get it right now and and the other portion of this is that what this will also do from an economic development standpoint is this will allow lenders in the space to you know this the rising tide raises all ships as they like to say and you know lenders in this space all lenders under this chapter will be able to benefit from this loan structure so the smaller mom and pops can can uh make larger loans um and and compete with larger companies and so i think that's a very important aspect of this but it also allows the larger companies to take a look at those customers that previously wouldn't have qualified for credit and pull them in and be able to address some of their loan needs um and so to sum up you know we believe that this is the appropriate course of action for the for the state to rectify the access to credit issue we believe that um this this bill appropriately does that in a very light touch free free market way that we think can benefit all kentucky one other thing i'll briefly mention chairman uh is that we do also increase the non-refundable portion of the loan processing fee currently that loan processing fee can be up to 150 maximum we don't change the maximum fee we do add 25 dollars to the non-refundable portion when there's a prepayment or or something is paid off early that was a request that was sent to us by some of the smaller dollar lenders in the process of working through some of these things thank you representative meredith we do have a couple of folks also signed up to speak in opposition to the bill do you want to take questions now or do you want to let the whole conversation happen and then come back and do questions at the end let's let everybody talk and then we'll come back to questions at the end that's what i would say all right sounds good um so in the room signed up to speak in person is dustin miller executive director kentucky consumer consumer finance association dustin if you want to go ahead and come forward and then we also have commissioner vice remotely and we'll get to him after dustin's finished thank you mr chairman let's try that again thank you mr chairman and members of the committee um this is a sort of very odd situation to be sitting here amongst a friend not only to me personally but to our industry representative meredith has really been somebody who you know over the years understands our industry and everything's provided good insight to you all and to us as we've gone about uh working our industry so it's uh i guess apt for masks in 2021 and 2020 that i would be here and uh in a bill against a bill that affects our industry that i wouldn't be supporting um he has worked really hard and and i do want to say there's been a lot of negotiation i don't know three four five phone calls and and so he's been very open and i i want to express our appreciation for that and uh for that opportunity to share that with him uh as we talk about it um i wish this was something that we could support our members had multiple conversations let me back up i'm dustin miller executive director of the kentucky consumer finance association uh we've been in uh created in 1933 representing installment lenders we have about 40 members that cover about 200 just under 200 storefronts across the the state so the mom and pop lenders that you heard about are independents as you heard those are generally our members three or four locations at most and you know generally live in the communities that they lend in um so to the bill the proposal has been put before you um my members really wrestled with this because we we do see the need out there to look at the rate structure constantly and make sure that it makes sense um whenever we look at this proposal that was brought to us we have concerns about loans at the sort of higher end of of the spectrum for our customers because you do see a lot of consolidation which i think mr clancy discussed when you see that consolidation at that higher end what this bill is going to do is really add a significant rate to those those loans at that higher end and those loans generally have really long you know three to five year type time frames on them in terms of things so you're wrapping somebody up in these consolidation loans for a long time we agree that our product is better than a lot out there it has a beginning and end all of the features that you heard before i guess our concern is the bill does add significant amount of rate top into that structure and the reason that i think the biggest portion of that why it's been the biggest issue for my members has been the blended rate structure so 2014 the rate structure was changed and we had a blend prior to that and the legislature we worked them and commissioner vice to change the rate structure at that time move the 36 percent ban that we have today from a thousand up to 3 000 to remove a second tier and to create the 24 above so it is bifurcated the way it is now um we did that um really it was about kind of three things and one was about the customer and it may sound funny and we're lenders and we like to make money just like anybody else but we do care about the customers that we serve because we live in their communities and they're people that we do business with over a long time and so when we look at this proposal you're talking about taking a rate i'll use ten thousand dollars as a loan for example today that's at 24 simple for the customer to sort of understand where that rate is and this bill would take that kind of base rate to 28 4 increase and that's not necessarily problematic i can understand what mr clancy's talking about terms of making sure you have the ability to lend into other stratas and offer credit to more people if you get more rate gives you more ability to do that to a certain extent but you can also get the customer upside down and that's where the blended rate really gives us concern because you you blend that portion at the 36 percent so on a 10 000 loan under this proposal half of it would be at 36 percent and half of it would be essentially half of it the other half would be at 28 so when you put those together it's 32 percent so in this bill that's a 33 increase in terms of the rate you have on that ten thousand dollar loan and i think that uh that is a lot of rate for consumers and i think the second reason that gives those pauses is how consumers understand that and why we moved away from sort of the blended rate so i use ten thousand i'm not strong at math i'll be the first one to admit it uh i use ten thousand because it's a simple number right five thousand five thousand well what do you think the uh rate would be for a customer at on a seventy seven hundred and fifty dollar loan 33 cents i'll tell you i can't do the math that fast you know i need a calculator to sit down and extrapolate it so i think for the customer the blended rate gives some concern about them knowing exactly what those terms are great part about our product is it's simple right you know how many payments you got to make you know what the rate is and here's your payment and off you go it's very simple straightforward there's not things that kind of got you in there so we think that's confusing to the customer then i'll just go back we made it we work with the legislature i was fortunate to represent the industry back then i've worked with a lot of you for many years commissioner vice was here then we came to the legislature and agreed to make the rate structure change away from a blend to the structure that we have today we think it served well i think our members don't see a lack of loans or lack ability to in terms of their outstandings we think that's been positive so we feel like we've made that deal and just feel really kind of bad about going back on a structure that we agreed to in the past and so that's sort of where we're coming from on this again it's out of much respect for representation i don't like being here today to talk about his bill again he is a friend and has been a friend to our industry uh but those are sort of our concerns it really is around that blended piece i think more than anything and i think the the blend causes the kind of second issue which is the higher end of the rate but uh thank you mr chairman again i call you mr chairman and chairman because he's a local government chair but uh thank you all for for having me and be glad to answer any questions thank you dustin we'll go ahead and hear from commissioner vice commissioner vice are you on remotely i am uh hopefully every everybody can hear me all right please introduce yourself and proceed good chairman roland and members of the committee uh thank you for allowing me to testify today on house bill 259 my name is charles vice and i'm the commissioner for the department of financial institutions in kentucky as been discussed already house bill 259 is an industry bill that is sponsored by representative michael meredith and is supported by part of the consumer loan industry the department values our relationship with the consumer loan industry the industry is an important part of the financial services industry in kentucky and provides access to credit for residents seeking to finance the purchase of consumer goods and services as of december 31st 2020 the industry had 830 million in consumer loans outstanding to residents in kentucky please keep in mind though that these numbers do not include figures for two uh two in two companies that have not reported yet so that that number could be a little bit higher once we have the final numbers both the department and industry have worked well with each other and have cooperated on several significant pieces of legislation that have already been discussed in 2000 during the 2019 legislative session representative meredith sponsor sponsored house bill 285 which completely modernized the consumer loan statute the department industry worked for over four years on this piece of legislation the results these efforts modernize the statute and align the supervisory sections relating to consumer loan to the consumer loan industry with other industries the department regulates the bill also contains several benefits to the industry while at the same time provided many consumer protection initiatives in 2014 uh during the 2014 legislative session the industry again worked with the department to amend the consumer loan statutes relating to interest rates on consumer loans the bill in 2014 eliminated the blended rate concept and established a clear interest rate based on the amount borrowed furthermore the bill lowered the interest rate for all loans with an initial balance of three thousand dollars or more house bill 29 259 though attempts to reintroduce the splendid rate concept for all loans with an original balance of three thousand three thousand dollars to fifteen thousand dollars significantly increasing the annual percentage rate for all loans with original balance of three thousand and one dollar to fifteen thousand dollars in addition it provides various other changes to the statute a similar bill was introduced in 2020 legislative session and at that time the department requested documentation from the industry to support the significant increase in interest rates to date the primary supporting reason for increasing the rate is the hypothetical argument that increased interest rates would result in greater access to credit however since the inc since the interest rate on consumer loans between two the three thousand and one dollar and fifteen thousand dollars was lowered in 2014 there have actually been more loans outstanding as of december 31st each year with the exception of 2018. so the percentage changes i'm getting ready to give you are year over year changes sorry my computer just messed up here is year-over-year changes in the amount outstanding in loans as of these consumer loans as of december 31st of each year in 2014 the 17 increase in the amount of loans outstanding 2015 a 40 2016 a nine percent increase 2017 a 10 percent increase in 2019 that amount of outstanding loans did decrease significantly to 23 percent and in 2019 increased again to about eight percent um i don't have the exact percentage change in 2020 yet because again we're waiting on two companies to report the industry has not provided any actual documentation to support the claim that access to credit for consumers would increase if interest rates inc is increased furthermore there is no indication the industry's cost of funds has increased since 2014 when interest rates allowed into the statutes were changed the u.s treasury curve has remained relatively low and we have been in a very low rate environment and in fact in 2020 the treasury yield curve has declined even more dramatically especially at the long end of the curve while the treasury curve represents a risk risk free yield is it is an indicator that the industry's cost of funds has not significantly increased since 2014 2000 or house bill 259 does reintroduce the blended interest rate concepts which results in significant confusion to the customer the apr annual percentage rate is very complicated to calculate under the blended rate concept the apr will substantially will be substantially higher than 24 allowed under the current statute and in actuality the apr cannot be determined until after the terms of the loan are set such as the loan amount and the length of the loan house bill 259 increases the annual percentage rate for all loans with an original principal some of betwe
n three thousand and one dollar and fifteen thousand dollars so in conclusion the department opposes house bill 259 is currently proposed due to the following reasons the negative impact of the consumer due to the blended interest rate which results in a complicated apr calculation and the higher interest rate that would be permitted on loans three thousand one dollars to fifteen thousand dollars the industry has provided no documentation to support the rate increase this is particularly concerning as the interest rate environment since 2014 has been very low thank you for allowing me to testify this morning and i'm willing to answer questions at this time thank you commissioner vice we always appreciate appreciate you making yourself available for committee we do have a one question so far from representative mcpherson so you've got a blended rate here whenever these loans are paid back is the lower interest rate paid back first or is it all or when you set the rate does it just blend out it blends out into an apr okay so it's gonna be the same rate once it drops below 3000 doesn't matter it's not a no it's just blended out through the whole process of the loan okay and to that point representative meredith one of the interesting things you've told me this week being a being a loan officer at a community bank is what is the what's the apr for for banks maximum apr is 36 if i'm not mistaken based on federal and state reg isn't that correct mr mr commissioner yes there's a usually rate set in kentucky but that's but banks do receive an exception from that and i would have to go back and look right now i don't know if an actual rate cap has been set for four banks but but a bank issuing a thousand or three thousand dollar loan could potentially have thirty percent thirty six percent when you figure fees interest rate apr and everything else you could see something up in the 30 yes yes that's that's correct uh representative lockett can can you um tell me why i guess uh given the testimony of of the two prior gentlemen and seeing that this is a rate or a structure that was in place before that was changed and now wanting to go back to that can you put it in layman's terms of basically what the purpose of the bill is so i was here in 2014 i don't remember a lot of the the issue in 14 when we changed that rate structure that that goes back too far for me and i was not involved heavily in that process however what we really have in the state are and you have two different associations who are represented here you have the association represented by by mr miller you have the association represented by mr clancy and it's really they they operate in a lot of different ways in two different marketplaces the marketplace by statute for consumer finance companies is a marketplace from a thousand dollars up to fifteen thousand dollar loans most of mr miller's clients operate in the three thousand dollar and below category of lending many of mr clancy's clients operate in the three thousand dollar plus category uh when they make those loans i think their average loan for one main financial is eight thousand dollars um and and so mr miller's clients are generally i think getting the 36 percent rate on most of the loans that they make if they so choose yeah i think just by by the numbers if you look at the the vast number of the numbers bulk of their loans are the 3 000 and below loans they're getting the 36 percent mr clancy and the the folks that he represents again are operating in a larger dollar space and so they are hampered by the the regulation that we have that has the bifurcated rate structure and so it is to try to benefit them in a in a way that they can make sense of offering the loans at the larger dollars without losing or being incentivized to make the smaller loans because again we have a rate structure that is bifurcated 36 percent on anything three thousand dollars and below 24 currently on anything above 3 000 and so if you're talking about having limited capital which all of these these companies do some have larger capital reserves than others and those kinds of things if you're making a business decision would you make three loans at three thousand dollars where you could get thirty six percent on them or would you make one loan at nine thousand dollars where you could get twenty four percent of it that's what the bill does is it addresses that issue [Music] representative hatton thank you mr chairman a question and then a comment my question is for mr miller is it fair to characterize um this bill and the opposition there too in that the smaller in-state owned lenders are in opposition to this bill and it's being pushed more by the multi-state larger lenders so it's not inaccurate but you know i have members who i have members maybe on the borders that operate in multiple states so yeah it's and i don't want i'm sorry mask on um i don't want to portray this as you know it's not in us versus them kind of thing there's a lot of reasons that those folks mr clancy's organization was a member of ours in 2014 when we made the rate structure changes then and for a lot of reasons those three or four larger entities they that those groups have gone a different way than we have we have a long history in kentucky to say we've been in place since 1933 we have a long history of having a lot of independence and being somewhat protective of those independents and those locally owned folks here i don't believe in protectionism i wouldn't ask you to do something just on that reason and i think it's what's best for the industry in the market but i do think there's something to be said for that local lender who owns that you know knows their customer down the street owns that you know rental property or wherever they've got their business to kind of have that there these folks like austin's group they have lots of storefronts too and you know have employees in the community also so i i think it's really about not so much that and much more for us about what the bill does and how it impacts you know kind of our individual members and just how comfortable we are with that and it's really around the blended rate i mean i i could be probably for the bill as it is if the blended rate wasn't there we just don't think that's just kind of an extra juice in the rate that we just don't think is necessary okay you had said earlier in your comments that a lot of your lenders know their customers and are in the same community with them and that the rates are just too high for those customers and that that's what struck me and and in the earlier comments um the the first speaker on zoom mr clancy um he was saying that most americans we've learned don't have more than 400 in savings and so they may need loans at this time especially in the wake of the kova 19 pandemic that has left a lot of people struggling financially and it sort of seems to me like at at this point raising rates on those loans that they're going to need would be taking advantage of of that need and and the idea that so many people are struggling so um i guess i i would not be comfortable especially with the blended right in the committee step may i make a comment to that please sure go ahead austin thank you mr chairman uh you know i to to to the representative's point you know we operate within the state of kentucky all of our members operate in every local community so we have 120 local community branches um we are operating in the communities with those people we we know our customers as well this isn't a scenario where you you don't stop you know if just because you work for a larger company doesn't mean you stop talking to your neighbors um you know we work with our customers every day and what we've seen throughout this kovic 19 pandemic is the notion that you know what we the the need for loans is still there but what we're seeing in the industry out there in terms of what commissioner advice alluded to as far as cost of credit is we get our credit our our capital from banks and from other places and what we're seeing is those types of credit boxes let's just call them are contracting at the same time the kovit 19 pandemic has created an environment where consumers are having a lapse of employment income so they are becoming less suitable to be underwritten for some of these loans and so you have a situation where you have where that where the credit is being contracted and the suitability of the consumers being impacted and so we specialize in this area because we have those relationships we have with our consumers we're able to kind of overcome that to a certain extent but that's very limited because of the rate structure that's in there and you know i'll make another point just about the blended rate structure in general we all operate um using loan software that calculates these items prior to the customer actually signing the loan at the loan closing we go through the documentation with the customer that has to be adherent to the truth and lending act or tila where there is a full disclosure on the front of the page and large bold print in a specialized box that lays out the cost of credit and how much it's going to cost so the notion that the consumer is having to figure out whether the what the loan is going to cost um is is kind of a non-sequitur because they're being we're disclosing that item at the onset for lending um you know and you know for for us it's the notion of whenever we're underwriting these consumers we're underwriting them to the point to a point where they can afford it so and and i think that's the other issue as far as access to credit goes when we talk about the unaffordability of loans or the inability of these people to get loans what this does is turn a no into a yes and i think that is the key that's a key point there this isn't an issue of raising rates on loans consumers have it's giving these consumers access to loans that they cannot be underwritten for right now under the current credit credit uh process um and then just with regard to the uh you know the loan volumes in the state since 2014 you know i'd say in 2014 there was some uh you know a little bit of claw back from the great recession and so those numbers i believe are kind of more indicative of that however i believe the full growth as far as what's reported to the commissioner isn't broken down as to the loan size and so from our own portfolio as we look inside there we have stopped making we don't make smaller loans but we've made less loans outside of that three thousand dollar space to individuals that need it and so i think that while they're there's definitely i think the overwhelming desire to be for consumer transparency is very important um blender rate structures allow for that and have been proven to do that at least 18 to 20 other states where they're currently being in use so i would say that if you know another state can do it i believe that kentucky lenders and kentucky regulators can certainly do as well and i would just say this is a rate cap that doesn't mean that that's what the rates are going to be on these loans the market is still going to drive that they can be lower rates based upon the creditworthiness of the borrower and the market that's going on this is just dealing with the cap on those rates thank you any other member seeking recognition for a question or comment vice chair lewis thank you representative for bringing this bill and thank you awesome for your testimony dustin i consider you a friend you hate to vote against your your friends um you know i i have uh one main in in my district and uh you know i've i've been through it and i've seen people i see all the time they're locals it's it's providing jobs to a local community as for the bill itself i mean we're talking on loans that people can't otherwise get uh so it's kind of a moot point in my eyes i mean when we're talking about everything that went on through 2020 that's still going on unemployment people struggling to pay their bills and we're talking debt consolidation home repairs auto repairs this is a good bill i encourage my fellow colleagues to vote for it i will be today thank you okay we have a motion in a second um see no other questions or comments uh from the members uh madam secretary please call the roll representative bentley yes representative fisher yes representative flannery yes representative frazier yes representative gooch yes representative patton no representative kirk mccormick i'm going to vote yes but i still think those interest rates are outrageous and i hope i never have to use your loan program i'm sorry representative koenig yes representative cole carney no and are you voting from your annex office today yes representative lewis yes representative lockett yes representative mcpherson yes representative meredith yes representative roberts no representative santoro representative smith explain my vote um i'm going to vote yes to get it out of committee but as we've discussed over the last few weeks uh my local banks have some concerns with it and i'd like to hear them out before you know when it gets to the floor but i vote yes to get out of committee today representative stevenson representative upchurch yes representative westrom chairman roland yes uh motion does pass with favorable expression and with committee substitute one thank you all for being here and um thank you for uh the cordial conversation uh seeing no other uh business before the committee i'll take entertain a motion to adjourn all in favor we're adjourned feel sorry for those people to get caught in that trap oh i've use
