Committee hears competing views on raising small‑loan cap to $1,200

The Consumer Protection and Business Committee heard testimony Jan. 27 on House Bill 2361, which would raise the statutory maximum principal for small loans from $700 to $1,200 and index that cap to inflation beginning Jan. 1, 2027, subject to a 30% of gross monthly income cap if that is lower.

Staff explained current statutory protections: a $700 cap, an 8‑loan limit per 12 months across all licensees, a one‑time fee structure that results in a 15% flat fee on the first $500 and 10% on amounts above $500, and an extended payment‑plan option of up to 180 days at no additional cost. Under HB 2361, existing database and payment‑plan safeguards would remain, while the principal maximum would rise to $1,200 (indexed annually) with the Department of Financial Institutions publishing the adjusted cap.

Representative Brandy Donaghy (44th LD), prime sponsor, said the change would better reflect the cost of common emergencies and provide a regulated option for consumers who lack savings. Drew Bowden of DFI testified about implementation concerns—specifically whether indexing outstanding balances to inflation is appropriate, whether annual indexing is administratively efficient (DFI suggested a two‑year interval), and whether simple website publication is legally sufficient without rulemaking.

Opponents included Kathy McCall, AARP Washington advocacy director, and Demas Nestarenko of SEIU 775, who warned that increasing the cap and indexing it will heighten financial risk for older adults and low‑income households and could revive debt traps addressed by 2009 reforms. Moneytree’s Trent Mattson testified for the industry that the change reflects inflation and that the bill preserves statutory safeguards, explaining the product is a flat‑fee loan with statutory offramps for consumers who cannot repay.

Questions from lawmakers addressed APR disclosure quirks under the Truth in Lending Act, how extended payment plans work, access for unbanked borrowers, and whether increasing the cap would require other limits on loan frequency. The committee did not vote on HB 2361 in this session.