Lexington Herald Leader
Posted on Fri, Feb. 13, 2009
Other states curbing abuses in payday loans
It’s time to put a cap of 36 percent on Kentucky’s payday loans. Annual rates above 36 percent are normally considered to be usury in Kentucky.
Yet, the payday loan businesses (check cashers) are allowed to charge an annual rate of 391 percent on these short-term loans.
These borrowers are in a world of debt, and these interest rates are designed to keep them there, not to help them improve their financial stability.
The loans are normally for a two-week period. Stories abound in which the borrowers return over and over again to “renew” their original debt.
They repeatedly pay the same exorbitant interest charges. Soon enough the interest payments exceed the original amount borrowed.
Fifteen states now cap these interest charges at 36 percent or less. Congress has limited the rate that these establishments can charge members of the military and their families to 36 percent.
The state of Georgia has banned the practice completely. Recently our neighboring state of Ohio enacted a 28 percent cap.
Thereafter the industry, by a petition drive, placed a referendum on the ballot to repeal the cap.
Despite a heavily financed campaign by the industry, the voters of Ohio chose to retain it.
Kentucky should follow the example of these states and bring these outrageous interest charges to an end. Please urge your legislators to put a 36 percent cap on payday loans.