Gov. David Ige Signs New Bill to Regulate Payday Loans with Lower Interest Rate

 Gov. David Ige signed House Bill 1192 into law, a landmark payday lending reform bill that assists working families and individuals who likely do not have a checking or savings account, or credit card to pay for emergency and/or recurring expenses. 

HB 1192 would phase out Hawaii’s statutory structure for payday loans — a short-term, high cost loan — by the end of this year and replace the product with more regulated, lower interest rate installment loans in 2022. The new law aims to correct Hawaii’s current payday lending laws in which borrowers receive short-term loans with their uncashed paycheck serving as the collateral.

A state audit found a 14-day loan might have so many fees that if renewed over the course of a year, the annual interest could legally be as high as 459%.

“For too long, payday loans have trapped so many of our most financially vulnerable people in a cycle of debt that they cannot escape.  This legislation not only corrects this serious injustice, but also and more importantly enables access to needed capital while providing a path to greater financial self-sufficiency and opportunity,” said Rep. Aaron Ling Johanson, House Consumer Protection & Commerce Committee Chair and author of the bill.



“What Hawaii was charging was three times higher than what the same lender was charging consumers in other states. We had a really, really dysfunctional market,” said Sen. Rosalyn Baker, who has been pushing to regulate payday loans in Hawaii for years.

HB1192 phases out current unregulated payday loans and creates a licensed, regulated installment lending system. Interest rates and monthly fees are capped, making the loans ultimately less costly to the consumer.

Consumer advocates say the bill will help borrowers (3% in Hawaii) who do not have banking accounts.


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