Rep. Melody McCray-Miller, D-Wichita, is planning to introduce legislation that would rein in payday loan companies in Kansas.
McCray-Miller said the loan businesses, which have proliferated across Kansas since the Legislature raised interest caps in 2005, charge short-term rates that equate to about 391 percent interest when annualized.
She said she wants to cap that at 36 percent annualized interest, similar to laws in other states and a federal law regulating lending to military personnel.
McCray-Miller said there are numerous problems with people -- primarily the poor -- having to take out multiple payday loans to pay off other payday loans, locking them into a cycle of borrowing from which they can't escape.
"You can't make a payment on it (a payday loan), you have to pay it off," she said. "If an individual couldn't pay their bills that first week, it stands to reason they won't be able to pay their bills and the loan that second week."
McCray-Miller said she will propose creation of a database to track payday loans, along with a cap on what any individual consumer could borrow in a year.
Whitney Damron, a lobbyist for the Kansas Payday Loan Association, said payday loans have gotten a bad rap.
He said the loans provide an opportunity -- sometimes the only opportunity -- for low-income people to obtain money for short-term needs.
"We think it's a matter of customer choice," he said.
He said the only alternative for many payday loan customers would be to write bad checks, which would cost them more in penalty charges than a payday loan costs and damage their credit ratings.
He said the problem of people borrowing money to pay off a loan is common in the credit card and mortgage industries, so it would be unfair to single out payday loan companies for special attention.
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Thursday, January 18, 2007
Quotes From The News
Speaking in reference to a proposed bill to tighten regulations
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Some states are putting caps on the amound of interest PayDay loans can charge. I don't remember which state has the lowest but it essentially put the predatory business out of business in that state. Somewhere back east.
ReplyDeletePayday loans are a deadly financial trap.
I think you are refering to North Corolina, that Rep. Miller refrenced in the interview I posted a few weeks back with her. I think they also capped it at 36% like her proposal, and the payday loan industry went out of business in that state.
ReplyDeleteObviously for most people Pay Day loans are a terrible financial choice.
ReplyDeleteHowever, one of the unintended consequences of overregulation is that it ends up making some people unserviceable. Some people can't get the money any other way, and I assume some actually ARE helped by the PayDay loans in short-term situations.
The reality is for people who are high credit risks, a Lender HAS to charge a high rate ( though I would agree, not in 100s or 1000s of %)because the risk is so high. Even "social lenders."
For example, I lend and borrow on Prosper. I can't touch anyone with less than C credit for under 20-28%. In states that have low rate caps, not even AA+ borrowers will ever get a loan. People who really need help will never get it because they have to be "protected" from helping themselves.
So ideally I am opposed to rate caps as I think ( like most things wealthy so-called liberals like to do to "help" the poor) they stand to hurt the poor.
However, as long as it isnt something stupdily low, it would probably be OK in application. However I do wonder about people who very well WOULD be helped by a 50-100% loan or something ( think short term, doesnt cost much and not much profit in it) who cant get a loan AT ALL if the rate is 36%. Illustrated by the fact that caps forced them out of business.
I wonder who people are most interested in helping/protecting? The mainstream BANKS? Government regulation is ALL about special interests and corporate lobbying. Those who really believe in helping the poor hate the government do-gooders.