Get the Facts
Kentucky’s 400% Payday Loans Threaten the Financial Security of Families
Kentucky data reveals payday loans are long term debt, not a quick financial fix.
- Database shows that KY payday lenders keep borrowers indebted for 202 days a year on average, much longer than the advertised 2-week loan!
- Kentucky payday lenders charge $15.00 per $100 borrowed, plus additional fees, every two weeks. This means payday loans carry at least a 391% APR.
- A typical Kentucky payday borrower was trapped in 10 payday transactions in 2012, usually taken out back-to-back, thus costing $562 in fees alone for a $330 loan.
- Despite marketing claims of a short-term loan, payday lenders depend on this long-term, repeat use – over 90% of payday revenue is generated by borrowers with five or more loans a year.
- In 2012, more than 5,200 Kentuckians were trapped in 30 or more payday loans!
400% payday loans threaten families’ and Kentucky’s economic security.
- Because of their high fees and short terms, borrowers cannot both repay their payday in full and meet the rest of their monthly expenses.
- In a 2011 survey conducted by Kentucky social service agencies, 67.2% of borrowers said that it was difficult to cover their other bills when they had a payday loan
- National studies show payday loans increase the likelihood of bankruptcy, delinquency on credit card bills, overdraft fees, and bank account closures.
- In 2012, payday lending drained almost $188 million in fees alone from Kentuckians’ pockets and into those of mostly out-of-state national payday companies. That’s a lot of money that could otherwise be spent on food, clothing, transportation or other basic needs.
Ending 400% is good policy for the military, and good for Kentucky.
- In 2006, Congress capped payday loans rates to military members and their family at 36% APR.
- Currently, 22 states (including neighbor states Ohio and West Virginia) and the District of Columbia have enacted laws that eliminate or limit the payday debt trap.
- Collectively, families in these states no longer throw good money after bad and save $2 billion a year that would have otherwise been washed down the debt trap drain.
Ending the payday loan debt trap promotes families’ financial security.
- In a recent study by Pew Charitable Trust, 81% of payday borrowers reported that in the absence of payday loans, they would simply cut back expenses. They do not report seeking predatory alternatives on-line or elsewhere; rather they get their finances in order.
- In Kentucky, the vast majority of payday borrowers interviewed by social service providers reported that payday loans hurt them rather than helped them, and they would not recommend them to a friend in a similar situation.
- In states where payday lending was once allowed, but then capped, borrowers report being glad to be rid a temptation that appeared easy to get in to but in reality was very hard to get out of.