Owens Continues Attempts To Cap Payday Loan Interest At 36 Percent

by Tony McVeigh on February 7, 2011

A Louisville lawmaker is again trying to put a 36 percent annual cap on payday loans in Kentucky.  The bill, sponsored by Representative Darryl Owens, went nowhere in two previous legislative sessions.  Owens expects to at least get a House committee hearing this year.

“We’re going to press on.  We anticipate and we’re very hopeful and we think that we’re going to get it out of committee, but we don’t want to take anything for granted.  This has been a three-year trap for a lot of us.  We don’t want to get this close and blow it,” he says.

Mary Love is an ordained minister in Oldham County.  She’s 65, retired and living on a fixed income.  Strapped for cash one year, she paid a payday lender $60 per month to keep floating a $400 loan.  She says it was nothing but a debt trap.

“I was sinking farther and farther into debt and knew that I had to do something to break out of it.  Altogether, I paid about $1,450 dollars in fees on a loan of $400,” she says.”

Owens knows he faces stiff opposition from payday lenders, who are lobbying hard to kill the bill. Kevin Borland, a payday loan industry spokesman, says the cap will put lenders out of business.  And he says there is no proof payday loans trap low-income Kentuckians in a cycle of debt.

“We fully acknowledge that these are not products that are right for everyone,” he says. “But if managed correctly, they can be a short-term solution to a problem.

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Kara Amundson February 7, 2011 at 6:58 pm

I am proud to hear that Rep. Owens is taking a stand. It just shows how deeply entrenched these institutions are that a 36% cap is the starting place for this bill. Even to imply that payday lenders represent “legitimate business” is to line, line, line the pockets of the rich at the crippling expense of the poor. I will happily support Rep. Owens, because this is a starting place. But what we really need is to ban these vile institutions altogether and press banks to a) open low-cost, accessible branches all over town (in groceries, etc.), and b) let high-risk people open limited accounts so that no one gets burned. Surely business can find a way to profit from doing the right thing.

Vicki Evans February 8, 2011 at 4:33 pm

I manage one of these “vile institutions” and I have never held a gun to a customers head and made them sign the paperwork on a loan. The fees are posted for everyone to see when they walk in the door. It is the customers responsiblity to have a plan to pay back the money they borrow. It will cost them $30 to borrow $200. It’s not he $30 dollar fee that is the problem. They don’t have a plan to pay back the $200 either. You can call my business vile all you want but the responsibilty for payment is the customers if they don’t have a plan to pay it back they shouldn’t borrow it. If I loan out $50,000 a year @ 36% interest, that’s $18,000 that wont even pay my salary which isn’t very much more then that! Will you loan these high risk customers $200 out of your pocket just with the promise that they will pay you back? I don’t think so.

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