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Archive for Tuesday, December 12, 2006

Wichita lawmaker considers capping payday loan interest

December 12, 2006

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— When North Carolina lawmakers capped the amount of interest payday loan companies could charge for short-term loans, the industry went bust in that state.

Melody McCray-Miller, D-Wichita, is hoping a measure she plans to introduce in the upcoming legislative session - which could include an interest rate cap similar to the one that drove the payday loan industry out in North Carolina - would make "predatory lending" less lucrative in Kansas.

"I am still in the process of evaluating how effective a 36 percent rate cap on what I would call all predatory lending would be," she said.

In Kansas, a customer can borrow up to $500, with the lender agreeing to hold a postdated check until the borrower's next payday. The fee for the service typically is $15 per $100 borrowed.

But some customers take out a payday loan with one company to pay off a similar loan they've taken out from another.

Staff members at consumer and credit counseling groups in Wichita say they have heard of customers with as many as 18 loans.

Supporters of the payday loan industry argue that many customers do not have access to short-term loans anywhere else, and that such loans provide a service to those who need fast cash.

Whitney Damron, lobbyist for the Kansas Payday Loan Association, said people critical of payday loans are trying to take a choice away from customers.

He said a 36 percent cap like that in North Carolina would force payday loan stores to close in Kansas.

Sen. Don Betts, D-Wichita, said he supported a cap on payday loan interest rates.

"People borrow $200, $300 and $500, and end up paying three times that amount back," he said. "Will they ever get out of debt?"

Comments

wayta 8 years ago

Mr. Damron can say that those critical of payday loans want to deny their customers a choice, but I have found as a landlord that is the difficulty with those who use such services: they have made one poor choice after another, and now this poorest of choices!

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