Senate committee hears push to raise Washingtonsmall-loan cap to $1,200, with strong public opposition

Senate Business, Trade and Economic Development Committee members on Jan. 29 heard hours of public testimony on SB 6,250, a bill to raise Washington's statutory maximum for certain small loans from $700 to $1,200 and to require the Department of Financial Institutions to adjust that cap annually for inflation beginning in 2027. Prime sponsor Senator Claudia Kaufman presented the bill as an update to reflect modern costs while preserving existing borrower protections.

Kaufman told the committee the measure is intended "to make sure people who rely on small loans have access to regulated transparent options," and said the change is not meant to encourage additional debt.

Supporters from the industry argued the cap has not kept pace with inflation and that licensed lenders operate under statutory safeguards. Trent Mattson, director of government affairs for Moneytree, said the proposal would "provide qualified borrowers with greater access to a safe legal credit option" and emphasized underwriting limits and payment-plan protections already in statute.

Opponents included legal-aid attorneys, housing and poverty advocates, veterans and consumer advocates who said raising the cap risks worsening financial harm for people already struggling. Julia Kellison of the Northwest Justice Project, who runs a weekly debt clinic, reminded the committee that payday loans were a long-recognized predatory product and that the APR disclosures on lenders' websites reflect high effective annualized rates. Molly Gallagher of the Statewide Poverty Action Network cited DFI data showing average payday loans remain well below the current cap and argued the $700 limit has prevented the worst abuses since 2009 reforms.

Several witnesses described how short-term, high-fee loans can create a repayment "sticker shock," forcing repeat borrowing. Cesar Carter, testifying in opposition, said a past $400 loan he took forced him to repay $575 within days and said a higher cap would have made that burden impossible to manage.

Representatives of DFI suggested technical fixes to the bill's draft language, including where and how the department should publish annual adjustments (the Washington State Register rather than a press release) and whether adjustment frequency should be reconsidered.

Committee members pressed both sides on specific technical issues, including how the federal Truth in Lending Act requires APR disclosure (cited by opponents as showing high APRs for short-term loans) and industry descriptions of effective interest rates and underwriting practices. Moneytree's representative said licensed lenders already use borrower underwriting and extended-payment plans that reduce the risk of a cycle of debt.

No formal action or vote was taken during the hearing. The bill will remain under committee consideration as members weigh competing proposals about consumer access and borrower protections.