KENTUCKY YOUTH ADVOCATES - Media Release

For Immediate Release

March 20, 2008

Contact:

Tara Grieshop-Goodwin

Office: 502-895-8167 x118

Cell: 502-558-4090

Tracy Goff-Herman

Office: 502-895-8167 x121

Cell: 502-298-6987

Terry Brooks

Office: 502-895-8167 x113

Cell: 502-235-2396

Payday Loan Bill Passes House 56-35

Kentucky Takes a First Step to Protect Families

Frankfort, KY- Today Kentucky’s House of Representatives passed a measure to introduce moderate limits on payday lending and create a database that would show whether applicants are ineligible because they already have payday loans outstanding. House Bill 500 passed 56-35.

“This is a great first step that adds protection for consumers without unduly hurting payday lenders,” says the bill’s sponsor Representative Johnny Bell of Glasgow.

The bill takes a moderate approach that will not force the industry to leave the state, but sets the stage for information gathering to determine the extent the industry impacts Kentuckians.

"It's great to see some movement in the right direction," says Mary O'Doherty who runs a self-sufficiency program for the Kentucky Domestic Violence Association. "Too many Kentuckians are falling into the ever-deepening hole of payday loan debt. We can't turn a blind eye to the financial harm they cause families across the state."  

The bill, as passed, reflects some agreement with the payday lending industry. The main part of the bill is the creation of a database that will allow the Office of Financial Institutions to enforce current law. The database would also give officials a clearer picture of the impact of payday lending on families.

The bill includes provisions to:

• Institute a database to track the number of payday loans being authorized by lenders.  It will be administered by the Office of Financial Institutions (OFI) and will allow OFI the ability to enforce current law.           
• Change the fee to be based on the loan amount received rather than the face amount, which reduces the APR from 465% to 391%.  This allows the customer to pay $15 in fees and walk out with $100 rather than paying $15 in fees and walking out with $85.
• Prohibit rollover of loans, requiring consumers to wait until the next business day to take out another loan.
• Allow consumers to enter into an extended payment plan after 6 consecutive loans.
• Add enforcement powers for the Office of Financial Institutions.
• Require lenders to determine if the customer is able to pay the loan back by establishing a cap on the loan amount of 30 percent of gross monthly income.

“We commend Representative Bell for showing leadership and standing up for Kentucky families against a powerful and well-funded industry,” says Terry Brooks, executive director of Kentucky Youth Advocates.

House Bill 500 now goes to the Senate for consideration.

“In other states this type of legislation has been championed by groups on both sides of the aisle,” says Brooks. “We encourage the Senate to move this important bill.”

END