Unfortunately, there is little good news to report regarding the increased regulation of the predatory payday lending industry in Kentucky during the 2014 General Assembly. However, at the national level, the trend toward curbing these abusive lending practices continues. A number of state legislatures are tackling this important consumer protection issue during their 2014 sessions:
Idaho – The Idaho legislature passed SB 1314 which would restrict payday borrows from taking out loans in excess of 25 percent of their gross monthly income. If the bill is signed by the governor, Payday lenders will be required to offer consumers extended payment plans without charging additional fees or a higher interest rate. The legislation will also limit the number of charges that could be applied to bounced checks written by payday loan borrowers. In the words of Senator Lee Heider (R), the bill’s sponsor, “Fees get out of hand and make it a problem for people to pay back their loans.” SB 1314 “would help those in payday lending to get out of a cycle of payment, fee, payment, fee.”
Alabama – Representative Patricia Todd (D) has introduced a bill that would create a state database to track payday loans in Alabama (Much like the database implemented in Kentucky in 2010) State law already prohibits Alabama borrowers from taking out more than $500 in payday loans at any given time but the law has been virtually unenforceable due to a lack of oversight; the creation of the statewide centralized database will permit this law to be enforced with greater efficiency. While this legislation stops short of enacting a rate cap or loan limit on payday lending, it does represent increased regulation of predatory lending practices. As Representative Todd notes, “We’re making progress, but we’re doing it incrementally.” The bill has passed the House 93-1 and is headed to the Senate.
Minnesota – Representative Joe Atkins (Democratic-Farmer-Labor Party) introduced a bill that would restrict the payday loan industry from lending to consumers who are financially unprepared to repay loans on time. The legislation would also forbid lenders from offering loans to the same borrower more than four times per year. Finally, the bill would also increase scrutiny on the debt collection methods employed by payday lending services. The bill is currently still in committee.
Louisiana – Representative Ted James (D) and Senator Ben Nevers (D) have introduced legislation in both chambers of the state legislature that would cap payday lending fees at an interest rate no greater than 36 percent annually. As Andrew Muhl, director of advocacy for Louisiana AARP, notes, “The goal is to get Louisianans out of a debt trap. We see payday lending as a real drain on Louisiana’s economy.” Both bills are still in committee.
While meaningful progress in the Commonwealth is unlikely to occur during this session, advocates remain hopeful that Kentucky lawmakers will recognize that our state is being left behind in protecting its consumers from the payday lending debt trap and approach the 2015 legislative session prepared to act.