TOPEKA, Kan. (AP) — Kansas lawmakers are proposing a bill that would set a maximum interest rate for someone taking out payday or other short-term loans.
A joint legislative committee studying banking and insurance issues met Wednesday to consider the bill, which would cap the annual interest rate at 36 percent, the Wichita Eagle reported.
Supporters, such as Claudette Humphrey, have said the limit would help borrowers who are caught in a cycle of debt and are unable to get out. Humphrey is the director of stabilization services for Catholic Charities of Northern Kansas and oversees the Kansas Loan Pool Project, which helps clients replace high-interest payday and title loans with traditional loans at lower interest rates.
Humphrey said her clients often report high interest debt as harming their ability to keep up with rent, utilities and other expenses.
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“It is time to do what is necessary to stop the continued predatory practices” of lenders, she said.
Opponents have said the bill would effectively eliminate the payday loan industry and limit a source of credit used by many Kansas residents.
The bill would limit payday lenders to one outstanding loan to a borrower of less than $500. Lenders could charge a maximum monthly fee of 5 percent of the original loan principal or $20.
“Consumers of payday loan lenders are qualified to make financial decisions for themselves without government interference,” said Whitney Damron, a spokesman for the Kansas Consumer Financial Services Association, which is composed of payday lenders. “Who is to say whether it is better for a borrower to take out a payday loan to meet a short-term need versus the consequences of not taking out a loan?”
The Kansas Office of the State Bank Commissioner says more than 60 companies in the state provide payday and title loans at more than 300 locations.
The committee didn’t make any recommendations on the proposal Wednesday. Lawmakers could still consider it after their next annual session convenes in January.
Editors: This story has been corrected to show that the panel considering the proposal was a joint legislative committee studying banking and insurance issues, not the House Federal and State Affairs Committee.
Information from: The Wichita (Kan.) Eagle, http://www.kansas.com