BATON ROUGE, LA (WAFB) - A state legislative audit has found major flaws in the way payday businesses are regulated.
Payday loan lenders are parked on nearly every block in Mid City Baton Rouge.
The Louisiana Office of Financial Institutions (OFI) regulates the payday places. A state audit found some deficiencies in the way that the agency examines procedures used at some payday offices.
Louisiana Legislative Auditor Daryl Purpera said OFI employees kept incomplete notes of their payday visits.
“When they get to the office, the supervisors can't look at what they've done to see if the processes and procedures they employed were adequate to identify all of the potential violators,” Purpera said.
According to state law, a person can get a payday loan up to $350, pay a $50 fee and must pay it down by 20% or pay it off before they get another loan.
Purpera said because most are cash transactions it is difficult to tell whether that is happening.
“What we found was about 318,000 instances where the same person would go into a payday lender and on the same day they would close a loan and get a new one.”
That is known as an “illegal rollover.” OFI has the authority to issue penalties up to $1,000 per violation when payday lenders break the law. However, Purpera said auditors found over 8,000 major violations and not a single fine was issued.
“Penalties are certainly deterrents. Just like when you and I drive down the road and a policeman pulls us over,if they just give us a pat on the back we might speed again but if we get a penalty we may not do that.”
OFI released a statement that said the agency is developing a detailed way of keeping records and is also reviewing how other states track transactions to see if they can make additional improvements.
As for the rollover and refund violations pointed out in the audit, OFI responded in a thorough review in its review of lenders, "OFI has found no rollover violations and is continuing to investigate and address refund violations that pertain to loans that were paid in full within the first five days."
Purpera said OFI has implemented some of the auditor's recommendations. He said it is the only way to protect people who use payday.
“Regulations are set up so they don't get caught in these cycles of debt that they can't get themselves out of.”
Purpera said auditors will revisit OFI procedures in a year.