By the authority vested in me, pursuant to part II, Article 44 of the New Hampshire Constitution, on January 27, 2012, I vetoed SB 160, relative to regulation of installment loans.

I am vetoing this legislation because legalizing excessive interest rates for so-called "installment loans" - interest rates in excess of 400 percent APR - hurts our families, communities and economy.

SB 160 creates a new small loan product in New Hampshire - an installment loan - and overturns the interest rate cap for payday lenders. These new installment loans are essentially payday loans that would create an escalating spiral of debt for New Hampshire families that would undermine their financial security, as well as the financial well being of our communities and our economy. That is why 31 other states - including all the other New England states - ban these types of excessive interest rates for consumer credit.

SB 160 was strongly opposed by both Republicans and Democrats in the legislature, the American Friends Service Committee, the New Hampshire Local Welfare Administrator's Association, AARP, the New Hampshire Department of Justice, New Hampshire Legal Assistance and a coalition of churches.

While this legislation allows a lender to charge nominal interest of $15.50 per $100 installment, there could be as many as 26 installments per year with the resulting APR being in excess of 400 percent. On a 6-month loan with payments every two weeks, lenders will be able to charge consumers over $1,100 to repay a $500 loan. For vulnerable families, these excessive interest charges could force them further into a cycle of debt, and potentially onto public assistance.

Oversight and regulation of payday lenders under SB 160 is also inconsistent with current practices for other forms of consumer credit. For example, unlike current law for the examination of banks, the Banking Commissioner must provide a payday lender with advanced notice before conducting examination of its books, records and loan documents. Administrative fine authority over payday lenders is less than half of the existing authority over other lenders. Consumers will not receive the same level of protection from payday lenders as they do now with other providers of consumer credit.

The lack of adequate consumer protections and the existence of excessive interest rates will undoubtedly increase the cycle of debt for too many of our families are not in New Hampshire's interest. Therefore, I am vetoing SB 160.