Friday, April 1, 2005 | 11:02 a.m.
CARSON CITY -- The Senate voted 12-9 today to abolish the cap on interest rates that pawnshops can charge customers despite predictions that the change would open the door to "predatory lending" practices
Senate Bill 334 repeals the 10 percent interest rate limit for pawnshops and allows the customer and the business to agree on a rate.
Sen. Randolph Townsend, R-Reno, said that under the tax bill passed two years ago, pawnshops became designated as financial institutions. They were required to pay a 2 percent tax on their gross payroll as opposed to a 0.65 percent tax for other businesses.
Pawnshop owners made the argument that if they were going to be taxed as financial institutions then they couldn't be singled out with an interest rate cap that limited their revenue.
They wanted to be made exempt from either the tax or the cap.
Townsend said there was "very little appetite" to change the tax law, so the Senate decided to drop the cap instead.
He said the bill permits a customer, if he doesn't like the interest rate to be charged by one pawnshop, to shop around. He said this works in other financial fields.
But Sen. Terry Care, D-Las Vegas, said people who visit pawnshops are "desperate" and this would permit a 20-30 percent interest rate to be charged.
Sen. Steven Horsford, D-Las Vegas, said this change would put a "burden on the consumer."
"This is a predatory lending practice on low-income families," he said.
Senate Minority Leader Dina Titus, D-Las Vegas, asked if there was any legislation to remove the pawnshops from being classified as financial institutions, thereby lowering their tax bill.
Sen. Mike McGinness, R-Fallon, said there are several bills to modify the tax package passed two years ago. He said there would be a discussion on those bills next week.
Banks and other financial institutions are seeking to lower the 2 percent rate and also to abolish or lower the amount paid on each branch bank.
SB334 goes to the Assembly.
Voting against the bill were Democrats Titus, Care, Horsford, Maggie Carlston, Bob Coffin, and Valerie Wiener, all of Las Vegas, John Lee of North Las Vegas and Bernice Mathews of Reno. Republican Mark Amodei of Carson City, also opposed the measure.
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