Kentucky bars new businesses
Anyone reading this book might as well steer clear of Kentucky.
Kentucky lawmakers signed new regulations on payday lenders into law today. Now they are just waiting for the governor’s signature on the legislation.
One provision in the bill places a 10-year moratorium on new payday lenders moving into the area.
Statewide database
The new laws also require a database that keeps track of every payday loan given out in the state. This will allow lenders to easily find out if borrowers already have outstanding payday loans.
Government officials also will use the database to track the interest and fees payday lenders are charging. Some think this is a step toward interest rate caps and fee regulations.
Wrong direction?
Tres Watson, a spokesman of the Community Financial Services Association of America, would be on the front lines to advocate against interest rate caps.
“Payday lenders offer a valuable service and that it would be disastrous if the industry were legislated out of business,” Watson said, and he commends the Kentucky legislature for recognizing that.
South Carolina
A Senate subcommittee in South Carolina also approved payday lending legislation Thursday, which will now move on to the full Senate and the House for a vote.
The bill approved Thursday would limit the amount of a payday loans to 25 percent of a borrower’s monthly income. It also requires that there be seven days in between subsequent payday loans.
Commentary on new regulations
Advance America headquarters in South Carolina. Advance America is the biggest payday lender in the state.
The provision that requires seven days between payday loans encourages responsible borrowing practices, and responsible payday lenders and customers won’t be negatively affected by it.
However, the regulation that limits payday loans to 25 percent of the person’s income will only make things more difficult for low-income clients. For instance, a person who makes $1,000 a month would only be allowed a $250 payday loan, which might not be enough to help in a financial emergency.
If deferred-presentment lending wants to represent itself as legitimate “small business” that should not be “impeded,” then the industry must demonstrate that it’s willing either to regulate itself, or that it’s willing to cooperate with state legislatures in assuring regulation that requires lenders, in specific detail, to act in good faith.
Until then, it’s nothing but legalized sharecropping, with or without the dirt.
The idea of a database to keep people from rolling over loans is alright, but ten years before anyone else can open up a shop? That’s impeding small business, which is something I thought most state governments were all for. Small businesses are one of the cornerstones of the American economy, so this really doesn’t make any sense.
I guess there has to be some regulations to make sure people hare being treated fairly, but it also has to be profitable for the payday loan companies to make money, over and above there costs