Politics & Government

Citing new data, lawmaker again calls for cap on payday loan interest rates

FRANKFORT — State Rep. Darryl Owens, D-Louisville, introduced a bill Wednesday to curtail interest rates charged by payday lending companies.

New data show there might be a need for such legislation, said House Speaker Greg Stumbo, D-Prestonsburg.

A state database established in 2009 shows at least 83 percent of payday lending revenue was generated by borrowers with five or more transactions in 2010, Owens said.

He said the numbers confirm "disturbing trends" about the depth of debt caused by payday loans in Kentucky. The database tracked the number of loans given per person.

Owens' measure, House Bill 182, would put a 36 percent cap on consumers' rate for payday loans, as the U.S. Congress has done for members of the military. Seventeen states have such a law.

Representatives of the payday lending industry have opposed an interest-rate cap. They have said that industry offers a needed service for people whom traditional banks won't serve and the service keeps people from losing their homes and helps put food on the table.

Owens has filed this legislation in two previous legislative sessions, which last year had 21 co-sponsors but was not given a hearing in committee.

"Clearly, these numbers show that 400 percent payday loans are not a quick, short-time solution as they claim," Owens said. "The information shows us exactly that these loans keep Kentuckians indebted for the long term, collectively costing millions of dollars in fees that could otherwise be used to support their families' and our state's economic recovery. We must act on the clearly painted picture now before us."