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The legislation, filed by Rep. Johnny Bell, D-Glasgow, would set up a database to track so-called "deferred deposit transactions," which are short-term, high-interest loans against someone's paycheck.
State law prohibits more than $500 worth of such loans to an individual at any one time, but Kentucky has no way of enforcing that restriction because the Office of Financial Institution does not track the loans.
"These entities are running throughout our commonwealth without anyone knowing what they're doing. I think our state government needs to know the types of practices these businesses are doing," Bell said on Tuesday at a press conference sponsored by Kentucky Youth Advocates, which supports the crackdown.
Bell said the database could cut by 25 percent the number of loans because that is how many are thought to be illegal.
Payday lending is flourishing in Kentucky. Since 1999, the number of lenders has more than doubled to 800 in 2007, according to the state.
In 2005, an estimated $826 million was loaned to Kentuckians this way, with borrowers paying $131 million in fees, according to Tracy Goff Herman, KYA deputy director.
Most borrowers end up getting one two-week loan after another, paying $45 to $60 each time, equivalent to an annual percentage rate of nearly 400 percent.
Gov. Steve Beshear's administration supports the bill.
