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Pulling back the curtains on wage-theft enforcement in MN; Trump's latest attack is on RFK, Jr; NM LGBTQ+ equality group endorses 2024 'Rock Star' candidates; Michigan's youth justice reforms: Expanded diversion, no fees.

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Transportation Secretary Pete Buttigieg says rebuilding Baltimore's Key Bridge will be challenging and expensive. An Alabama Democrat flips a state legislature seat and former Connecticut senator Joe Lieberman dies at 82.

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Historic wildfires could create housing and health issues for rural Texans, a Kentucky program helps prison parolees start a new life, and descendants of Nicodemus, Kansas celebrate the Black settlers who journeyed across the 1870s plains seeking self-governance.

KY Consumer Groups Take Aim at Payday Loan 'Debt Traps'

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Thursday, December 30, 2010   

LEXINGTON, Ky. - Consumer advocates say too many Kentuckians can't escape the payday lending debt trap, and want state lawmakers to consider a cap on the interest rates and fees those businesses charge. Dozens of Kentucky groups are putting a stamp of approval on a plan for a 36 percent interest rate cap on those short-term loans.

Jason Bailey, research and policy director with the Mountain Association for Community Economic Development, says information from Kentucky's real-time payday lending database shows lenders are racking up millions in fees from borrowers who can least afford it.

"Folks who take out payday loans are very often underwater and they're caught in a debt trap where they have to take out loan after loan after loan, and that is the source of this industry's revenue for the most part."

The state's database shows Kentuckians have paid more than $80 million in fees so far this year from payday loans, with up to 400 percent annual interest rates. Brigitte Blom Ramsey, special projects director with the Kentucky Youth Advocates, says that database reveals how families searching for a quick financial fix still end up short-handed.

"Many borrowers take out multiple loans in a year's time. And the database for the first nine months of 2010 showed that on average, Kentuckians are taking out 8.6 loans per borrower in that period of time."

Ramsey says the identity of the typical customer who struggles to repay the two-week loan may come as a surprise.

"The majority of payday loans go to unmarried women with dependent children. And the payday lending model was put together supposedly to support an emergency need, but in fact, because of the short repayment period and the fees, families and individuals are forced to repeat that borrowing to make ends meet."

Ramsey says the database shows more than 95 percent of payday lending revenue comes from customers with multiple loans, with the remainder mostly coming from borrowers who took out only one loan. Since 2008, the number of payday lenders in the state has declined from 781 to 667.

Federal law already puts a 36 percent cap on payday loans made to military families. Payday loan companies say the interest rates and fees are justified for the high-risk loans they grant, and that their loans fill a need, since traditional banks won't help people with bad credit. In some states where caps have been placed on the loans, payday lenders say they've been forced to close.




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