Wichita Legislator Looks to Cap Rates on Payday Advances, Cash Loans
By Paul RizzoPayday Loan Writer
A Wichita legislator wants to place a cap on the interest charged by faxless payday advance and car title loan stores - an annual rate that is currently as high as 390 percent a year.
Rep. Melody McCray-Miller, D-Wichita, and a grassroots community group hope Kansas can follow in North Carolina’s footsteps, explains The Wichita Eagle.
That state used to have about 1,000 companies that made short-term loans to consumers before it began enforcing a cap on interest rates.
Now it has none.
Although Sunflower Community Action says its goal is not to drive every payday loan company out of Kansas, it does seek tighter restrictions.
“Whatever they’re doing in North Carolina should be what’s done everywhere,” said J.J. Selmon, community organizer for the northeast chapter of the group.
Selmon and other leaders from Sunflower recently returned from a meeting in Washington, D.C., where officials from several states talked about how they are regulating the industry.
Supporters of the industry say bad credit payday loans are a good alternative for people who can’t borrow money elsewhere. They say the industry fills a need not met by traditional financial institutions, which typically do not make small-dollar loans.
A 36 percent interest rate cap similar to that in North Carolina would force payday loan stores to close, said Whitney Damron, a lobbyist for the Kansas Payday Loan Association.
The industry says that groups that are critical of cash loans are trying to take choice away from consumers.
Damron challenged Sunflower Community Action to find a way to provide short-term loans to consumers.
Setting a payday advance limit
Miller is not yet ready to say what the exact monetary limits will be in the bill she hopes to introduce.
“We are looking at doing two things,” she said. “One, we’re going to work on tightening up the actual statute that speaks to payday lending. We’ll amend that. And we’ll look at capping the amount that an individual can receive. 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.”
Kevin Glendening, deputy bank commissioner for the state, said he definitely supports a rate cap on car title loans because that is a secured no fax cash advance loan.
“On payday loans, I’m not necessarily unsupportive of it” but those are unsecured loans, he said.
Glendening noted that Congress passed a bill authorizing a 36 percent cap on payday advances made to military members.
“Obviously the question is, if the federal government believes that these higher rates create a problem for their folks, why doesn’t that carry over to the rest” of the population, Glendening said.
Currently, Kansas law says that consumers can’t have more than two outstanding payday loans with a lender or more than three in a 30-day period.
Rolling over a loan is illegal. But consumers can pay off a no fax needed payday loan and get another one on the same visit.
To help enforce the law, Miller wants a database in place that would track how many loans a consumer had.
Damron said the government shouldn’t get involved in making credit decisions for consumers. He said the government wouldn’t tell consumers how many credit cards or mortgages they can have.
Miller thinks her bill would have support.
“There are several of us who are very concerned about what’s going on with payday lending and what we call predatory lending,” she said.
Damron said the payday cash advance industry will fight tighter restrictions.
