About 1,500 members of churches and neighborhood organizations gathered in Old Louisville on March 23rd to pledge their support for a crackdown on payday lenders. Politicians and bank leaders joined members of the group Citizens of Louisville Organized and United Together at Memorial Auditorium for a meeting to launch a campaign they hope will catalyze legislation capping the annualized interest rate that payday lenders can charge at 36 percent.
Several legislators said that 36 percent might still be too high a figure, and many urged attendees to rally on the issue in Frankfort next year.
Payday lenders offer the short-term loans to people who often don’t qualify for bank loans. It generally costs about $15 for a $100 loan, repayable in two weeks. That translates to 390 percent annual interest. The group says the industry collects $131 million in fees from Kentuckians a year.
Democratic lawmakers contend that predatory lending is thriving in some areas of the state, including West Texas. The claims were part of a report three Democratic state senators, Eliot Shapleigh of El Paso, Wendy Davis of Fort Worth and Rodney Ellis of Houston, released Monday.
High-interest loans are hitting some rural counties hard because people are filing taxes. The top 25 counties with the highest percentage of refund-anticipation loans, loans given to people anticipating an IRS refund, are all rural.
A key Banking and Insurance Committee moved Wednesday to weaken proposed payday lending regulations, killing a provision that would tie the amount of a payday loan to a borrower’s income. The amendment is good news for payday lenders. The nation’s largest payday lender said it probably could not operate under a provision that would have capped payday loans at $500 or 25 percent of a borrower’s gross paycheck.
The Senate subcommittee tied the pay day loans to a borrower’s income, meaning anyone seeking a $300 payday loan - the maximum payday loan allowed today - would have to earn at least $31,000 annually. The House-passed bill set loans limits at $600 and requires a cooling off period after 10 consecutive loans.
Idahoans who use short-term payday loans could receive an additional layer of protection under a measure before the Idaho Senate.
Under the bill, which passed the Senate Commerce and Human Resources Committee last week, loans would become void unless the lender was licensed in Idaho. Currently, only companies in Idaho - not those operating only online or outside Idaho - are required to be licensed.
Other states have passed similar laws. The bill wouldn’t apply to the approximate 300 payday companies already physically operating in Idaho. The motive is to protect consumers who use the loans from companies outside Idaho - including online or off-shore companies. The average loan for an Idahoan is between $300 and $400.