FOR IMMEDIATE RELEASE
AARP Calls on General Assembly to Close Payday Loan Debt Traps Now
Consumers Can’t Wait Until 2010, Payday Loans Hurt Consumers Everyday
LOUISVILLE, Ky – AARP today called on state lawmakers to amend House Bill 444 – sponsored by Rep. Johnnie Bell (Glasgow) – when it comes to the full House for a vote next week. On Thursday, Banking & Insurance Committee Chair, Rep. Jeff Green allowed a vote on HB444 without public comment, discussion or amendments.
HB 444 institutes a new state-operated database (and charges consumers a new fee per loan) to track high-interest rate payday loans, but fails to provide any significant new consumer protections. If passed, the new law doesn’t go into effect until 2010. “The bill falls short of providing real reform. It needs to limit interest rates for payday loans to protect consumers from the debt trap with these products, said Cathy Allgood Murphy, AARP’s Associate State Director for Advocacy. “We’re asking our KY AARP members across the state to contact their legislators in the House before the vote. House members need to look very closely at what’s not in HB 444, before they vote for it.”
Marketed as short-term relief in a cash crunch, payday loans in KY 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. AARP has a long history of protecting consumers and is seeking amendments to HB 444 when it comes to the full House of Representatives for a floor vote next week. AARP is supporting a loan rate cap of 36% and limiting the total number of loans to 4 per year.
Every year Kentuckians lose $131 million in payday loan fees. 40% of borrowers believe payday loan rates are less than 30% APR, when in fact rates in Kentucky exceed 400% APR. According to AARP state director, Phil Peters, “Payday loans are insidious. They lure people in, low-income consumers and working people already struggling, and capture them in a cycle of legal loan-sharking.”
AARP is one of 22 member of the Kentucky Coalition for Responsible Lending.