CLOUT Seeks To Limit Payday Loan Interest Rates

by Gabe Bullard on March 23, 2009

A local organization is seeking to limit interest rates for payday lenders.

The organization Citizens of Louisville Organized and United Together, or CLOUT, will hold a meeting Monday to look at the issues surrounding payday lending.

Specifically, the group hopes to cap lenders’ interest rates at 36 percent. Some lenders in the commonwealth charge up to 400 percent APR on payday loans.

Legislation recently passed the General Assembly that would establish a database of lenders and enforce the limit on the number of loans they could give, but did not address interest rates. CLOUT co-president Bishop Walter Jones says rates must be controlled, and the group hopes to work with lawmakers on legislation to that effect.

“We’re working to bring the Governor on board,” he says. “Also the Attorney General Jack Conway, he has agreed to work with us.”

Jones hopes to have the legislation introduced in the 2010 session of the General Assembly.

Comments Closed


Payday Lending Rep March 24, 2009 at 5:12 pm

A 36% APR (typical fee for ANNUAL credit products) on a $100, two-week advance would be $1.38. Payday lenders could not cover the cost of originating a loan, let alone meeting employee payroll and benefits, or other fixed business expenses.

Let’s not forget that the often showcased 391% annual interest rate for a payday loan is rather trivial when put next to a $100 bounced check with a $55.59 NSF/merchant fee, which translates into 1449% APR, or even a $100 credit card balance with a $37 late fee – 965% APR. Conveniently enough, critics always seem to leave out these minor details.

Eliminating payday loans as an option does not eliminate the need for short-term credit. Instead it forces consumers to choose between more expensive alternatives such as fees for bounced checks, overdraft protection, or late bill payments.

Biff March 24, 2009 at 5:22 pm

I think Clout’s proposal is acceptable ONLY if it applies accross the board to all credit equally-this would include bank Overdraft fees, which, if figured on an annual basis like they propose for payday loans, can reach interest rates in the 10s of thousands of percent. In fact, it is utter nonsense to attack payday lending, (which is a much cheaper alternative than bouncing a check in most cases), based on annual rates of interest on what is usually a two week loan. Thankfully, KY politicians have resisted this phony posturing.

Is a hotel a “predatory hotel” because it charges $154 per night? That’s $4,620 per month, or $56,210 per year! You can rent an apartment for about $500 per month. So, using the same price cap proposed for short-term loans, the $154 room rate should be set at a maximum of $16 per night.

What’s more, much of the attacks on the industry have been undertaken by the Citizens for Responsible Lending-a lobbying organization is funded by Herb and Marion Sandler, billionaire financiers who made their fortune offering the worst kinds of subprime, adjustable-rate mortgages-those with NEGATIVE AMORTIZATION! I wonder where “CLOUT” is coming from. I don’t know, but would not be surprised to see some bankers involved in this organization who know THEY are the ones who are really hurting the consumer, and who resent the fact that payday lenders can save conumers hundreds and thousands of dollars a year versus bounced check fees.

As always-follow the money-otherwise what is the sense in taking a tool away from Kentucky consumers that is proven to save them money?

Foster March 25, 2009 at 10:06 am

Perhaps CLOUT should take a look at the outrageous rates that banks charge. If I were to bounce a $100 check my bank will charge me at least $35 for a non sufficient funds fee + the amount the merchant can charge me as well. Let’s say that comes to around a total of $55 or so & that is a real number! If we were to put an APR on this would come over 1,400%! Who are the real sharks here? Capping these two week loans at a 36% APR would put make the payday loan a service of the past. These people cannot keep the doors open, pay the employees & their benefits at that rate. Essentially a 36% cap is a ban. I also ask CLOUT, why is it their business to tell me what services I can or cannot use. I find a payday loan a much better option for me than a bounced check. CLOUT needs to stay out of my finances.

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