Time To Regulate The Loan Sharks

I received an email last night, asking me to meet a group of people at the (Kansas) State Banking Commissioners Office later today. Why? Because of my perceived knowledge about predatory lending.

So I burned the midnight oil, to come up with a few points to bring up, when I attend this meeting before I go to work. Below is what I came up with.

It is no secret, to those who know me, that I have problems with various companies involved in predatory lending. No matter if you call them payday loans, title loans, refund anticipation loans or holiday loans they are scum. They charge anywhere from $15 to $30 per $100 borrowed, which translates into 390% to 780% and in some cases better then 1000%.

They specifically target low income individuals by setting up just outside of military bases or in low income neighborhoods.


What needs to be done?

1. The biggest thing is to follow Congress' model to address such loans to military personnel. Pass state regulations to cap interest interest rates for all consumers at 36%. We have to protect ALL consumers, not just our military personnel. These loan places exacerbate not only soldiers' financial challenges but also that of the low to lower-middle class.
   
   These places do not help anyone, instead they make matters worse, because not only do they still have their regular expenses that they struggle to pay, but they also have to repay the loan in 7-14 days. Because of this most these consumers end up, renewing the loan making their debt to these places larger.
   
   It is a cycle that never ends and is hard to break. Capping the interest rates won't end this entirely, but will help protect the consumer, so that it will be easier to dig out.
2. In addition consumers should be prohibited from having more then 2 1 total loans at any one time. This would require all of these places to communicate via a computer network to prevent consumers getting a loan at one loan facility and then going to another to get an additional loan.