CONCORD – Gov. John Lynch has vetoed legislation that would raise interest rates charged on short-term installment, or payday, loans, saying they would bring “a cycle of debt.”

In his veto message Friday, Lynch said the measure could allow for annual interest rates as high as 400 percent.

“For vulnerable families, these excessive interest charges could force them further into a cycle of debt and potentially onto public assistance,” Lynch wrote.

In 2008, Lynch signed a state law capping these short-term rates at 36 percent.

The payday loan industry responded by closing more than 20 locations, laying off more than 150 employees and leaving the state.

A spokesman for Advance America, a payday loan company, said Lynch’s action would force New Hampshire residents to try to obtain short-term cash from unregulated offshore companies selling products on the Internet.

“New Hampshire consumers deserve better,” said Jamie Fulmer, vice president for media affairs. “They should be free to make their own decisions and they should have the same opportunity that millions of Americans have in 31 other states, which is to choose competitive, regulated financial products and services that best suit their needs.”

The payday loan industry urged the Republican-led state Legislature to ignore Lynch’s actions and override the veto.

“Republican leaders in the legislature should be commended for recognizing this void in the landscape of alternatives and for their efforts to improve access to credit and to protect the welfare of their constituents,” Fulmer said.

“We look forward to working with New Hampshire legislators to encourage an override of this misguided veto.”

Lynch isn’t guaranteed a victory.

A month ago, the House of Representatives passed the measure, SB 160, but its 208-139 roll-call vote was short of the two-thirds majority needed to override Lynch’s veto.

However, House Republican leaders who favor this cause rallied behind a similar measure that lifted the interest rate that can be charged on title loans, in which property such as a car title is used as the loan’s capital.

Initially, the House barely endorsed that measure, 180-171. Five months later, after lobbying by House GOP leaders and industry leaders, the House overcame Lynch’s veto by a vote of 248-123.

The bill vetoed by Lynch on Friday was authored by Sen. Sharon Carson, R-Londonderry, who also represents Hudson.

Lynch also objected to the measure requiring the banking commissioner to give payday lenders notice before doing an examination of the company’s books or loan documents.

“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 and are not in New Hampshire’s interest,” Lynch said.

Kevin Landrigan can reached at 321-7040 or klandrigan@nashuatelegraph.com. Also, follow Landrigan on Twitter (@KLandrigan) and The Telegraph’s interactive live feed at www.nashuatelegraph.com/topics/livefeed.

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