Kentucky and Iowa Groups Seek Payday Loan Reform

By: Javi Calderon
Kentucky and Iowa Groups Seek Payday Loan Reform

Social groups in both Kentucky and Iowa have formed coalitions within their state to push for more stringent payday loan regulations.

In Kentucky the State House Banking and Insurance Committee will vote next week on legislation that will cap the interest rate at a 36% annual rate.

Critics, like Marian McClure Taylor, head of the Kentucky Council of Churches describes payday lending as “sinful.” On the other hand, a spokesperson from the Kentucky Deferred Deposit Association points out that the legislation could very well put lenders out of business, forcing over 180,000 customers to search out other credit and fast cash options in times of crisis.

In Iowa a coalition of consumer groups like the Iowa Catholic Conference, the National Association of Social Workers and Iowa Citizens for Community Improvement plans to push the Iowa State Legislature to adopt the same 36% cap for cash advance loans.

Currently Iowa’s State laws for interest caps don’t regulate loans of less than $500. Most payday advance loans are around $200 and rarely more than $500.

Both Kentucky and Iowa have failed to pass such regulation in the past. Kentucky Representative Darryl Owens has tried twice before and has been refused a hearing by the State HBIC.

There are currently 15 states in the U.S. who have adopted the 35% annual interest rate cap on payday loans.

The State of Virginia, on the other hand, is pushing towards expanding their rules on payday lending. The Virginia State Senate has nixed two bills aimed at closing payday lending loop hopes and restricting lenders to the popular 36% rate.

Virginia Senate Majority Leader Richard Saslaw is now sponsoring legislation that will allow citizens from out-of-state to come to Virginia for a payday loan on the premise of offering people the financial services that they seek.

Whether governed by law or not, any consumer of a financial product should understand their personal responsibility in assuring their own financial well-being by reading the agreement they are signing and understanding it.

A payday loan is a viable option for quick cash in case of an emergency, but if you know that you might struggle to pay it back within the loan term it is in your best interest to seek other options.