New Report Details Economic Cost of Payday Loans in Kentucky Counties
Payday lending debt trap strips Kentucky consumers and their communities, urban or rural, of millions of dollars each year.
February 23, 2010
FRANKFORT, Ky. — Today the Kentucky Coalition for Responsible Lending (representing 64 KY organizations) released a year-long study on the economic impact of payday lending across the state’s 120 counties. House Bill 381 remains locked in House Banking & Insurance Committee and KCRL called on Chair Representative Jeff Greer to give the bill a fair hearing.
KCRL’s report, “The Debt Trap in the Commonwealth: The Impact of Payday Lending on KY Counties,” is the first comprehensive look at documenting the economic damage of payday lending in Kentucky counties. KCRL Chairperson, Amy Shir, said the report delivers concrete facts that support capping payday loans at 36 percent. Shir added, "The people of Kentucky and their communities will be better served by limiting payday loans to a 36 percent rate cap. It is the right thing to do and is an example of sound public policy."
Key Findings Include:
• The economic impact of payday lenders is costly in both rural and urban communities. Louisville Metro was home to 132 lenders who collected nearly $27 million in predatory fees in 2008, but the magnitude of impact is even stronger in Mason County, home to less than 10,000 people and 8 payday lenders who collected $1.6 million in predatory fees in 2008.
• The majority of payday lenders in Kentucky are nationally owned and their profits leave the state.
• Payday lenders locate in places where people are most likely to need access to small-dollar short term credit—but low- to moderate-income families are also least likely to be able to repay the loans within the two-week term.
KCRL supports House Bill 381 because it will bring Kentucky in line with the same protections Congress passed to protect military families with a 36% interest cap on most loans. The county data in this report strongly suggests that Kentucky should consider this an economic priority during the deepest national recession since the Great Depression.
According to Reverend J. Richard Sullivan with CLOUT, "Payday loans violate the biblical mandate against usury, especially when committed against the poor. KCRL represents tens of thousands of Kentuckians who are calling for a 36% rate cap on payday loans—in fact, the largest gathering of citizens last year in Louisville to address any community problem (nearly 1600 people affiliated with CLOUT) was to call for this rate cap—and CLOUT will gather another 2000 in Louisville next month to call for it again."
The Coalition's report “The Debt Trap in the Commonwealth: The Impact of Payday Lending on KY Counties” was distributed to all members of the General Assembly and Governor Steve Beshear. The report is expected to assist state Representative Darryl T. Owens (D – 43) and his co-sponsors' work to pass House Bill 381 calling for a new 36% APR cap on payday cash advance loans
Click here to download report.