KCRL Supports House Bill 381-A Proven Solution

Payday Lending Bill Introduced in 2010 General Assembly

Rep. Darryl Owens joins with Co-sponsors and KCRL to introduce House Bill 381 seeking 36 percent interest cap on payday loans.

FRANKFORT, Ky. – The Kentucky Coalition for Responsible Lending (KCRL) joined with Rep. Darryl Owens (D – 43) and his Co-sponsors to introduce House Bill 381. The bill seeks to protect consumers from being snared in a spiraling debt trap by enacting a new 36 percent interest rate cap on payday loans. Marketed as short-term relief in a cash crunch, payday loans in Kentucky carry annual interest rates of 400 percent and regularly catch working people – or those with a steady source of income such as Social Security or a disability check – in a long-term debt trap. Over 40 % of borrowers believe payday loan interest rates are less than 30% APR, when in fact rates in Kentucky are at least 391% APR—and often exceed 400%. Nationwide, 9 out of 10 payday loans are made to repeat borrowers who take out nine or more payday loans in a year—a “cycle of debt”

“We believe this is a needed step to protect Kentucky consumers from a predatory product that costs hard working families approximately $150 million a year,” said Kip Bowmar, Executive Director of Community Action Kentucky and KCRL member organization. “We salute Rep. Owens and the 19 co-sponsors on this important legislation,” added Bowmar.

 

According to KCRL Chair Amy Shir,“We are in the middle of the worst recession since the Great Depression and we don’t want see working Kentucky families’ hard earned money stripped away by a predatory financial product.” KCRL consists of 64 organizations statewide representing hundreds of thousands of Kentuckians. “And, during tough budget times for the state, this bill doesn’t cost a thing and it protects Kentucky consumers. This is a win-win bill,” said Shir.

Support House Bill 381

Payday Lending Campaign Keeps Rolling

General Assembly Pushed to Cap Payday Loans - Consumers Need Real Protections

Your action, your voice make the difference!

Payday loans cost Kentucky families too much. The Kentucky Coalition for Responsible Lending supports a cap on payday loan interest rates at 36 percent APR—just like Congress passed to protect for our military families.

• Governor Steve Beshear supports the rate cap.
• House Bill 381 (Representative Darryl T. Owens) is seeking a common sense solution: limit payday loans to a 36% rate cap.

State Capitol - Frankfort

You can help protect Kentucky families from the payday loan debt trap by calling your state lawmaker today.

Ask your legislators to:

• support the 36% payday loan rate cap
• protect consumers
• become a co-sponsor of House Bill 381

 

Call – Senators and Representatives toll-free on the Legislative Message Line:

1-800-372-7181 • TTY Messages 1-800-896-0305 • En Español 1-877-287-3134

LRC Message Center is open:  Monday – Thursday (7:00 a.m. – 11:00 p.m.) & Friday 7:00 a.m. – 6:00 p.m.

Find your legislators online: www.lrc.ky.gov Send email to legislators http://www.lrc.ky.gov/whoswho/email.htm

More background:

The Kentucky Coalition for Responsible Lending now includes over 60 Kentucky organizations.  Click here to see facts sheets and personal stories on our 2010 General Assembly resources page. Some of the highlights:

Over 40 % of borrowers believe payday loan interest rates are less than 30% APR, when in fact rates in Kentucky are at least 391% APR—and often exceed 400%

Nationwide, 9 out of 10 payday loans are made to repeat borrowers who take out nine or more payday loans in a year—a “cycle of debt”

There are alternatives:  traditional small loans—at 36% or less—from consumer finance companies increased by nearly 40 percent after the rate cap was enacted in North Carolina.

Learn more about payday loans and find us on Facebook at  http://www.facebook.com/kyresponsiblelending

Herald-Leader Cartoonist, Joel Pett on Payday Lending

Lexington, KY – Herald-Leader’s Cartoonist, Joel Pett checks in on payday lending.

Herald-Leader, Joel Pett (1-20-10)

Payday Loan Interest Rates – Editorial

Cap payday-loan interest rates

Editorial published Dec. 20, 2009 – Lexington Herald-Leader

Not that long ago, payday lenders were called loan sharks and what they did was illegal.

Cap Payday-Loans Interest Rates

It’s easy to forget that because the payday-loan industry has amassed so much power and sunk its hooks so deep into the legislature, all in less than 20 years.

Kentucky should join other states, including Ohio and West Virginia, that have turned back the clock on legalized loan sharking.

Fourteen states and the District of Columbia have imposed reasonable limits on how much payday lenders may charge. Without a legal cap, annual interest rates often run above 400 percent.

It won’t be easy. With their market shrinking because of all the new laws, predatory lenders will fight harder than ever to hold on to Kentucky. A few years ago, the state was getting a new payday lender every four days.

It’s obviously a lucrative market — for the lenders.

For borrowers, it’s a road to burial in debt, bankruptcy and homelessness.

Just look at the coalition lined up to support new limits on payday lenders and you get a feel for how wide is the harm inflicted by this industry.

More than 60 members of the Kentucky Coalition for Responsible Lending, from across the state and political spectrum, are lined up in support of limits on payday lending. They include groups that serve the poor and elderly, housing agencies and shelters, asset-building and economic development groups, legal aid, religious groups, advocates for domestic-violence victims, even a couple of financial institutions.

There wouldn’t be such widespread concern if real people weren’t being hurt.

Gov. Steve Beshear is on board. Although Beshear once lobbied for the payday-loan industry, he promised earlier this year to support an annual interest cap of 36 percent on short-term loans. He renewed that promise last week.

As it stands now, three out of four borrowers can’t afford to repay their loans at the end of the two-week period. So they must keep borrowing, and paying exorbitant fees, sometimes until they owe more than they borrowed in the first place.

One advantage of capping the annual interest rate at 36 percent is that borrowers could actually afford to pay off a two-week loan rather than having to keep borrowing.

Beshear noted that Congress imposed a 36 percent cap on loans to military personnel to protect them.

What’s happened since then is instructive. Credit unions stepped up to increase small loans to cover immediate cash needs among military people.

In North Carolina, which did away with payday lending, a study found the loans weren’t missed and that people found alternatives.

The Federal Deposit Insurance Corp. is piloting a small-dollar loan program, encouraging banks to offer affordable small loans as an alternative to predatory lenders.

But banks and other traditional institutions will shy from the short-term, small-cash loan business until the legislature levels the playing field for them by capping rates on payday loans.

The payday loan industry insists that it’s simply filling a demand and saving people from bankruptcy and eviction — which is also what the loan sharks said.

© 2009 Kentucky.com and wire service sources. All Rights Reserved. http://www.kentucky.com

Governor Beshear Calls for Cap on Payday Lending

Gov. Beshear Calls for Rate Cap on Payday Lending

36 percent rate cap would match federal limit for military families

[Governor Steve Beshear released the following statement to the media on 12/15/2009]

FRANKFORT, Ky. (Dec. 15, 2009) – Gov. Steve Beshear today joined consumer advocates in calling for the General Assembly to limit the amount of interest payday lenders can charge customers to 36 percent. Currently those rates, on an annualized basis, can be more than 400 percent.

“Thousands of Kentuckians who have fallen on hard economic times are trying to find short-term means by which they can put food on the table for their families. In many cases they turn to lenders who, with no security needed, loan money with a very high expected rate of return,”

Governor Steve Beshear

 said Gov. Beshear. “A rate cap would be a strong protective measure that we can take on behalf of consumers.”

The 36 percent annual percentage rate (APR) cap is consistent with the limit the federal government implemented for military personnel and their families in October 2007. At least 15 states have followed suit and now prohibit high-cost payday lending by limiting the interest rate to a two-digit cap. Also, following the national trend away from payday lending, the Federal Deposit Insurance Corp. is now piloting a small-dollar loan program encouraging banks to offer affordable small loans as an alternative.

“The Governor is taking a direct and crucial step in supporting the financial well-being of Kentucky’s hard working families,” said Terry Brooks, executive director of Kentucky Youth Advocates. “In tough economic times, we have to be creative in fighting the high price of being poor in Kentucky. By tackling predatory lending practices through this payday loan interest cap, Governor Beshear will make a real difference for families from Prestonsburg to Paducah.”

A July 2009 Center for Responsible Lending report found that three-fourths of the loan volume of the payday industry is generated by borrowers who must re-borrow before their next pay period. The loans cannot be “rolled over,” so each time a new loan is made the full fee is applied. Consumer advocates say that this causes a cycle of debt that consumers find difficult to escape.

“The Kentucky Coalition for Responsible Lending (KCRL) applauds the Governor’s efforts to cap interest on payday loans at 36 percent,” said Anne Marie Regan, an attorney with the Kentucky Equal Justice Center and a member of KCRL, a statewide coalition of 64 member organizations that came together last year to seek reform of Kentucky’s payday lending law. “When Kentucky families are struggling to make ends meet, the legislature should ensure that all lending rates, including those on payday loans, are fair and reasonable.” More information on payday loans and the KCRL is online http://kyresponsiblelending.wordpress.com/

Today there are 743 payday lenders – also known as check cashers or deferred deposit companies – operating in Kentucky. A 10-year moratorium instituted in 2009 prevents new payday lenders from opening in Kentucky. This provision was included in HB 444 sponsored by Rep. Johnnie Bell and supported and signed into law by Gov. Beshear.

# # #

Payday Rate Cap – Editorial

Published in Courier-Journal, December 9, 2009 Payday rate cap The Coalition for Responsible Lending is looking for someone in Frankfort willing to sponsor a bill to set the same 36 percent annual interest rate cap for civilian payday borrowers that Congress adopted in 2007 for payday loans to military personnel. A similar proposal last session failed. The payday loan lobby in Frankfort is fierce — so fierce, that instead of a cap, a law was passed to create a data base that lenders presumably can access to identify borrowers for whom additional loans would cause them to exceed the legal limit of no more than two such loans at a time, each with a term of two weeks and totaling no more than $500. Yet, as one woman told The Courier-Journal , she was allowed to juggle as many as six payday loans at once. “As long as I’m paying them, they don’t care what I’m doing,” she said. Currently, payday lenders in Kentucky can charge up to $15 for every $100 borrowed — $75 for the maximum $500 two-week loan — which annualized adds up to an allowable interest rate of more than 400 percent. Payday lenders like it that way, and so the battle lines have already been drawn, as evidenced by an industry spokesman who said, “A lot of these so-called consumer groups, they don’t want consumer protection. They want the service to disappear.” Pay lenders do provide a service to people hard up for cash in the short term, and lenders willing to extend credit to risky borrowers ought to be able to realize a fair profit for the risk. That said, a 36 percent interest rate cap, although high, is probably fair. But it’s also as high as it should go. That rate, after all, doesn’t seem to have bankrupted the payday lenders who specialize in lending to Kentucky’s military personnel.

Coalition Members from Faith Communities Speak Out

Coalition Members from Interfaith Communities Call on General Assembly to Act on Payday Loans

Leaders also seek to alert consumers of the dangers of falling into the debt trap during holiday shopping season. 

Kentucky Coalition for Responsible Lending members from interfaith communities across Kentucky at a news conference in Louisville called on members of the General Assembly to enact a new 36% interest rate cap on payday cash advance loans. As coalition members, the faith leaders are pushing for new limits in 2010 General Assembly.

Speaking with the support of Coalition leaders and on behalf of their respective organizations, these included:

Robert J. Castagna, Executive Director

Catholic Conference of Kentucky (Frankfort) - Press Release-Payday loans 12-09

Reverend J. Richard Sullivan, CLOUT Member

Citizens of Louisville United and Organized Together (CLOUT) – CLOUT Press Release_Payday Loan Rate Cap 12_7_09

Reverend Dr. Marian McClure Taylor, Executive Director

Kentucky Council of Churches (Lexington) 

Deferred Deposits, Delayed Justice?

2010 General Assembly Facing Tough Issues

From the KY Gazette  (November 2009)

 by Laura Cullen Glasscock at glasscock@kentuckygazette.com, 

Deferred Deposits [ 2010 General Assembly]

The provisions of the check-cashing and deferred deposit statutes are currently contained in Subtitle 9 of KRS Chapter 286 that authorizes licensed deferred deposit businesses to charge a service fee not to exceed $15 per $100 borrowed. The service fee is for a period of 14 days. Borrowers may obtain one loan not to exceed $500 at any one time, and rollovers are prohibited. The deferred deposit transaction statutes were amended in 2009, effective July 1, 2010, by House Bill 444 to expand regulation of the industry. The legislation also provides for a 10-year moratorium on licensure of new businesses after July 1, 2009. A review by staff of the Kentucky Office of Financial Institutions annual reports found the number of licensed payday locations in Kentucky increased from 214 in 1998 to 754 currently.

On its face, a $15 fee per $100 borrowed appears to be interest in the amount of 15 percent. However, because of the 14-day loan term, a new loan can be obtained 26 times per year, which results in an annual percentage rate of 391 percent. Reportedly, most borrowers are unable to repay the loan with their next paycheck. As a result, borrowers often take out a new loan before their next paycheck, resulting in an additional fee. Several sources report that 87 percent of new loans are opened within two weeks or before the borrower’s next payday, indicating they are unable to repay the original or previous loan and sustain the cost of living expenses without taking out a new loan. This common practice is referred to as “rollover” Making multiple rollovers, referred to as “churning,” results in an annual percentage rate of 391 percent in Kentucky. Nationwide, churning accounts for 76 percent of the deferred deposit total loan volume.

There are alternative methods of providing small, short-term loans up to $1,000. In an effort to reach the unbanked population, the Federal Deposit Insurance Corporation is currently conducting a two-year pilot program for banks to provide small loans up to $1,000 to borrowers, even if they have poor credit. Thirty-one banks in 15 states are enrolled in the project, including two banks in Kentucky, Citizens Union Bank in Shelbyville and Kentucky Bank in Paris.

Owensboro Legislator Files Financial Literacy Bill in 2010

Representative Jim Glenn urges financial literacy, files bill in 2010 General Assembly

James Mayse, Messenger-Inquirer Published: Monday, October 26, 2009

Rep. Jim Glenn

Rep. Jim Glenn is hoping the third time is a charm for his financial literacy bill. Earlier this month, Glenn, an Owensboro Democrat, prefiled a bill for the 2010 General Assembly session that would encourage universities to give incoming students information on financial literacy.

This will be the third time Glenn has introduced the bill. The bill managed to pass the House of Representatives in both 2007 and 2008 but died for lack of action in the state Senate. Glenn, who is a professor at Owensboro Community & Technical College, said students entering college — and the general population — need education on matters such as debt management, credit cards and saving for retirement. “I teach finance, and it’s always something that’s needed in our society,” Glenn said Friday. “Our society has changed in how we look at finance, and our students need to be up to speed.” The bill is not a mandate. Rather, the bill encourages universities to provide incoming freshmen with materials on debt management and credit cards and to conduct seminars on financial matters during orientation. “The way it is structured, it’s asking the colleges — when the freshmen come in — to give them a week of financial literacy,” Glenn said.

The sessions and material would be for every freshman, regardless of their major. “This is to help protect them,” Glenn said. “Credit cards … they give you a $1,000 credit limit just with your signature — and if you overrun it, they require you to pay it back immediately.” Glenn said his concern is that credit card debt among college students forces some to take jobs and switch from being full time to part-time students — with the end result of some of those students not finishing their degree requirements. “We have to make sure we don’t have any more barriers to prevent them from getting a college degree,” Glenn said. “It costs the state no money,” Glenn said of his plan. “The banking system is on board and said they would help. They’re interested in making sure students are financially literate because it helps (the banks) in the long haul.”

Glenn’s goal for the upcoming legislative session is to find a member of the Senate who will help champion the bill. “On the House side, I’ve passed the bill two years in a row,” he said. “I have to get the Senate side on board.” With legislators’ focus surely to be on the state’s financial troubles, gaining attention for the bill will be a challenge. “Anything that’s not state budget or budget-related is going to be put on the back burner,” Glenn said. “I have to push (to show this is) a priority item for the state of Kentucky.”

James Mayse, 691-7303, jmayse@messenger-inquirer.com

Listen to KCRL on State of Affairs

Listen to Archive copy of  - WFPL 89.3 State of Affairs -  http://www.wfpl.org/state-of-affairs 

http://www.wfpl.org/2009/11/16/be-wise-when-borrowing-money/

 

State of Affair’s Show – Be Wise When Borrowing Money
We all need to borrow money from time to time. But as you get older, it’s not just $2 from Mom to buy some candy, it might be $100,000 from a bank for a home or $15,000 from a car dealer for a car, or for some it’s $200 from a payday lender just to get through the week.

So what should you know before borrowing money? How do you avoid predatory lenders; and what if you need a loan, but you have poor or no credit? Join us on Monday as we talk about borrowing money.

Related Links:

• Center for Responsible Lending
• Louisville Asset Building Coalition