Payday loan reprieve: Kentucky House Bill 182 fails to pass
Kentucky lawmakers who stood behind House Bill 182 are now wallowing in the agony of defeat, reports the Louisville Courier-Journal. The proposed legislation that would have cut the APR payday lenders may charge to 36 percent was voted down 13-10 in the Kentucky House Banking and Insurance Committee. Military loans remain capped at 36 percent APR, per federal law.
Payday loan companies will remain open
Louisville Democrat Rep. Darryl Owens, who served as the sponsor of House Bill 182, compared the payday loans bill to a cooked piece of meat.
“It’s done. You can stick a fork in it,” he said.
Despite numerous extant studies that illustrate that payday lending is much less expensive than comparable alternatives and that a legitimate, non-exploitative market for the product exists, Rep. Owens and others cling to the belief that payday loan interest rates are “obscene.” While it may be true that some people who use payday loans are in difficult financial straits, industry surveys indicate that not only do most users have sufficient income to repay their loans in a timely fashion, but defaults and rollovers are rare.
Kentucky disagrees with Rep. Owens and company
House Bill 182 would have been “a job killer,” said John Rabenold of the Kentucky Deferred Deposit Association, a payday lending industry group. An APR of 36 percent on payday loans would only generate a single dollar and change in profit for every $100 loaned. After a payday loan business takes care of its operational and salary expenses, such “profit” is negated entirely. The bulk of the roughly 650 payday lending outlets in the state would be forced to shut down, which would cost Kentucky as many as 2,000 jobs. No politicians who plan to run for office again want that on their resumes.
The need for payday loans in Kentucky
Consumers whose access to traditional credit has been restricted because of credit history will inevitably experience financial shocks from time to time, particularly when emergency expenses arise. From medical bills to car repairs, the need for quick cash from payday loans exists. Democratic Rep. Jim Gooch told the Courier-Journal that he feared lack of access would leave Kentucky families without access to money during just such an emergency.