Jul 14, 2014 8:01 PM by Akeam Ashford
In an audit issued by the State Legislative Auditor's office, the office finds major issues with the state agency charged with making sure banks and lenders follow the law.
The report found the Office of Financial Institutions(OFI) did not have any procedures in place to make sure the businesses were following the law.
The report found there were over 8,000 violations where a borrower got overcharged, and the OFI did not follow up on 82 percent of the violations that required a refund to the borrower.
The report focused on short-term loans between $100 and $350 dollars that must be paid back in full, along with a fee ranging from $20 to $55.
Studies show between 10 percent and a quarter of Louisianans take out loans every year.
Supporters argue payday lenders provide a valuable service to borrowers who live paycheck to paycheck and do not qualify for other loans.
On the other hand, critics argue payday lenders lock desperate people into repeat loan cycles with annual interest rates that average 425 percent in Louisiana, according to studies.
"By its nature, payday lending is affecting people who are already financially strapped, and are already struggling," said Daryl Purpera, Louisiana State Legislative Auditor.
The audit found a lack of oversight by OFI not issuing fines and penalties to payday lenders, which he said allowed the companies to overcharge borrowers.
Something he said will need to be fixed.
"The penalties are a deterrent factor, so without them there's very little chance for deterrent. We made a recommendation that they begin to use that authority they already have," Purpera said.
State Rep.Terry Landry, D-New Iberia, supports the auditor's findings.
He said he hopes it will open the conversation in the legislature on how to cap high interest rates charged by payday lenders.
"I'm appalled and a little saddened that this audit pointed out all of these deficiencies, but I think it's part of a bad policy that is now coming home to roost," said Landry.
Purpera said he spoke to the head of the OFI and they've agreed to work on the problem.
"The director of the Office of Financial Institutions said he will do further study of the cases he has, and try to enforce where he can," said Purpera. "I believe they have the best intentions and they will implement our recommendations."
The audit requires the Office of Financial Institutions to recover that over-charged money.
There's no time table on when borrowers could receive that money.