An advocacy group is calling on lawmakers to enact tougher regulations for Kentucky's "payday" loan industry, saying it takes advantage of poor families who can't get short-term loans elsewhere.
Kentucky Youth Advocates released a study this week showing the short-term, high-interest loans cost Kentuckians $131 million a year in fees.
"Families use payday loans when they don't have other options," said Tara Grieshop-Goodwin, deputy director of the nonprofit advocacy organization. "But the terms of the loan make them nearly impossible to pay back."
Rep. Johnny Bell, D-Glasgow, said he agrees more regulation is needed and said he will file a bill this week aimed at imposing more restrictions on the payday loan business, which the advocacy group said has grown rapidly in recent years.
"We're trying to help some individuals get more of a fair return," Bell said.
Kentucky law allows loans of up to $500 for two weeks at a charge of $75.
Often, borrowers can't pay off the full amount, so they roll it over into a new loan -- with additional fees -- which would translate to an annual interest rate of 391 percent, according to the youth advocates' study.
More restrictions are needed to help "Kentucky's working families keep more of their income," said the organization's director, Terry Brooks.
Bell said his bill will propose increasing the loan period from two weeks to 30 days to give borrowers more time to repay the full amount.
It would also lower the fee lenders charge from $15 per $100 lent to $12 per $100.
And it would require more oversight of the industry through monitoring for compliance and a database to track information about payday loans. Similar measures have failed in past legislative sessions.
Bell said he doesn't want to eliminate payday loans -- as at least one state has -- but he does want to try to put in more protection for consumers.
source:http://www.courier-journal.com/apps/pbcs.dll/article?AID=/20080207/NEWS0101/802070403/1008/NEWS01
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