Indiana Lawmakers Consider Bill to Raise Payday Loan Limits

Indiana lawmakers are reviewing a bill that could significantly change payday lending in the state. The proposed legislation would allow Hoosiers to borrow larger amounts from payday lenders and other nontraditional financial institutions—but at higher interest rates and additional fees.

What the Bill Proposes

Currently, payday loans in Indiana are capped at $825 with a minimum repayment period of two weeks. The new bill would introduce "supervised loans," permitting non-depository lenders—those that don’t offer checking or savings accounts—to issue loans up to $25,000. It would also raise the maximum interest rate from 25% to 36% annually and allow lenders to charge additional monthly service fees.

Breakdown of Fees

Under the proposal, lenders could impose monthly service fees based on the loan amount:

• Up to $2,500: Fee up to 8% of the original loan amount.

• $2,501 - $4,000: Fee up to 6%.

• $4,001 - $5,000: Fee up to 5%.

• $5,000 - $25,000: Loans must have a minimum term of six months.

• Finance charges cannot exceed 36% per year on unpaid balances.

Supporters vs. Critics

Rep. Jake Teshka (R-North Liberty), who authored the bill, argues it fills a gap in the market for subprime borrowers.

"At 25%, some borrowers simply don't qualify, so certain loans go unmade," he said, emphasizing the lack of lending options for those with poor credit.

However, critics worry the bill will put low-income Hoosiers at greater financial risk. Bryce Gustafson, who previously took out a payday loan, shared his experience:

"I didn’t fully understand the fine print, and I had to ask my parents for help to get out of debt," he said. "If banks won’t lend to them, people are almost forced into this."

Erin Macey, director of the Indiana Community Action Poverty Institute, also voiced concerns:

"The idea of offering high-cost loans to struggling borrowers doesn’t make sense," she said.

What’s Next?

As lawmakers debate potential amendments, the bill awaits a committee vote. The outcome could impact thousands of Hoosiers relying on payday loans for emergency financial relief.