Business as Usual for Payday Lending, Committee Vote a Win for Industry
House Banking & Insurance Committee’s first vote on a 36% cap for payday loans falls short in delivering a proven solution despite public opinion and hard facts.
Today, the House Banking and Insurance Committee came within a few votes of fixing a defective consumer product for Kentucky. Instead, the state’s first vote on a 36% rate cap on payday loans guarantees another year of burdening families with 400% interest rate debt – and another highly profitable year for payday lenders. A small number of Committee members voting to pass House Bill 182 could have made all the difference.
Those Committee members voting to support HB 182 clearly heard the facts, responded to public concern and voted the wishes of their constituents. They stood for the economic recovery of Kentucky families rather than the triple-digit rate return for out-of-state payday lenders.
Today, the industry won and Kentucky’s working families lost. Payday loans will continue to be a defective financial product trapping consumers in a cycle of debt. Although 73% of KY voters supporting the 36% cap, it’s now business as usual for payday lenders. And even after being told that some payday lending businesses may close, 50% of those same voters still think 36% is better than 400% interest. It’s clear that the people of Kentucky recognize 400% interest rate loans are a taking advantage of consumers and expect lawmakers to fix it.
According to Anne Marie Regan, KCRL Co-Chair, “Today’s vote is a loss for consumers and common sense across Kentucky. We’ve missed an opportunity for lowering abusive 400% rates in favor of proven solutions to protect our families, just like Congress did for the military and 17 other states (including the District of Columbia) have done for their citizens.”
Finally, despite exaggerated claims by the industry of job loss or lack of consumer alternatives, 400% interest rate payday loans will continue to be a net economic drain to the state. In 2010 alone, Kentuckians paid more than $80 million dollars in payday loan fees – mostly to out -of-state payday companies. KCRL believes that as long as 400% interest rates clog the market, other safe options that exist will not be able to compete and these safe alternatives will remain out of reach of borrowers trapped in payday loans.
Today’s vote may be a temporary set-back for consumer advocates in the faith-based community, who care about the poor and seek justice, housing advocates seeking to help families get into and stay in their homes, senior advocates seeking protections for the aging, family and children advocates who care about families with children and advocates helping victims of domestic violence and for those in poverty to build assets.
“It’s clear that the people of Kentucky will not accept “business as usual” and want action to limit this toxic product for our working families,” said Lisa Gabbard, KCRL Co-Chair. “We commend Representative Darryl Owens for his work to pass House Bill 182. Owens and those Committee members voting to pass HB 182 put people first and listened to those voices calling for justice and protecting all our working families,” added Gabbard.
KCRL remains committed to changing state law and protecting consumers and their local economies from exploitive, high-interest payday loans and ending the cycle of debt trapping thousands of Kentuckians.
More on KCRL https://kyresponsiblelending.wordpress.com/