An effort to cap interest rates on payday loans in Kentucky may not happen this year, but a coalition of Louisville churches is still taking up the cause. Citizens of Louisville Organized and United Together, or CLOUT, is making payday loans the focus of its annual campaign, starting with a March 23 community gathering at Memorial Auditorium at 970 S. 4th St.
CLOUT hopes to persuade lawmakers to put a cap of 36 percent on the annualized interest rate that payday lenders can charge borrowers. In previous years, the group has focused on other issues such as illegal drugs, affordable housing and elementary school reading programs.
The Rev. Keith Switzer, of Mosaic United Methodist Church in the Pleasure Ridge Park area, said CLOUT's members realize the chances are slim for any legislative changes to take place this year regarding interest rates. But he said the group's 15 member churches will work on the issue through 2009, and into 2010 if necessary. CLOUT also is taking steps to encourage the estimated 29,000 people in the metro area who don't use banks to form relationships with a traditional bank or credit union.
Payday lenders such as Check 'n Go, which has 39 locations in Kentucky, charge a fee of $15 for every $100 borrowed, which translates into an annual rate of 391 percent. But Jeff Kursman, a spokesman for Check 'n Go in Cincinnati, said that figure is misleading because the loans are only outstanding for two weeks.
Instead of worrying about interest rates, Kursman said advocacy groups would be better off promoting consumer education, and making sure borrowers understand the terms of their loans -- including high-cost products offered by traditional banks.
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One such product, a cash-advance loan called Early Access, was launched in the Louisville area by Fifth Third Bank last September. Early Access carries a 120 percent annualized interest rate, but Fifth Third spokeswoman Gail Lyttle said it is "not nearly as expensive" as a payday loan and is designed only for existing customers in need of emergency money.
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Several attempts have been made in recent years to impose tighter restrictions on interest rates for Kentucky's payday lending industry, but most have not been successful. One current piece of legislation, House Bill 444, would create a computer database to monitor high-cost loans and make sure that borrowers don't have more than two such loans at a time.
A House committee approved the bill earlier this week with no interest rate changes, but an amendment was filed Thursday by State Rep. Jim Glenn, D-Owensboro, creating a 36 percent cap -- the same limit sought by CLOUT. Kursman said such a limit would amount to "prohibition" for the industry, and wouldn't allow Check 'n Go to even cover the cost of utilities in its stores. For every $15 charged on a loan, he said $13 is spent on overhead, loan defaults and other items.
Glenn, who described the industry as "almost a form of financial slavery," said yesterday that he expects the bill to receive a full vote next week. It also would need to be approved by the Senate.
Organizers at CLOUT hope to draw more than 1,500 to the March 23 assembly to launch the effort they are calling Fair Finances for All Families. Switzer said the churches -- mostly Baptist, Catholic and Methodist -- hope to encourage local elected leaders to push banks to be more accessible to low-income customers, and offer more alternative products to payday loans. CLOUT also is working with groups such as AARP and Kentucky Youth Advocates to advance the cause.
Reporter Alex Davis can be reached at (502) 582-4644.
CLOUT hopes to persuade lawmakers to put a cap of 36 percent on the annualized interest rate that payday lenders can charge borrowers. In previous years, the group has focused on other issues such as illegal drugs, affordable housing and elementary school reading programs.
The Rev. Keith Switzer, of Mosaic United Methodist Church in the Pleasure Ridge Park area, said CLOUT's members realize the chances are slim for any legislative changes to take place this year regarding interest rates. But he said the group's 15 member churches will work on the issue through 2009, and into 2010 if necessary. CLOUT also is taking steps to encourage the estimated 29,000 people in the metro area who don't use banks to form relationships with a traditional bank or credit union.
Payday lenders such as Check 'n Go, which has 39 locations in Kentucky, charge a fee of $15 for every $100 borrowed, which translates into an annual rate of 391 percent. But Jeff Kursman, a spokesman for Check 'n Go in Cincinnati, said that figure is misleading because the loans are only outstanding for two weeks.
Instead of worrying about interest rates, Kursman said advocacy groups would be better off promoting consumer education, and making sure borrowers understand the terms of their loans -- including high-cost products offered by traditional banks.
(2 of 2)
One such product, a cash-advance loan called Early Access, was launched in the Louisville area by Fifth Third Bank last September. Early Access carries a 120 percent annualized interest rate, but Fifth Third spokeswoman Gail Lyttle said it is "not nearly as expensive" as a payday loan and is designed only for existing customers in need of emergency money.
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Several attempts have been made in recent years to impose tighter restrictions on interest rates for Kentucky's payday lending industry, but most have not been successful. One current piece of legislation, House Bill 444, would create a computer database to monitor high-cost loans and make sure that borrowers don't have more than two such loans at a time.
A House committee approved the bill earlier this week with no interest rate changes, but an amendment was filed Thursday by State Rep. Jim Glenn, D-Owensboro, creating a 36 percent cap -- the same limit sought by CLOUT. Kursman said such a limit would amount to "prohibition" for the industry, and wouldn't allow Check 'n Go to even cover the cost of utilities in its stores. For every $15 charged on a loan, he said $13 is spent on overhead, loan defaults and other items.
Glenn, who described the industry as "almost a form of financial slavery," said yesterday that he expects the bill to receive a full vote next week. It also would need to be approved by the Senate.
Organizers at CLOUT hope to draw more than 1,500 to the March 23 assembly to launch the effort they are calling Fair Finances for All Families. Switzer said the churches -- mostly Baptist, Catholic and Methodist -- hope to encourage local elected leaders to push banks to be more accessible to low-income customers, and offer more alternative products to payday loans. CLOUT also is working with groups such as AARP and Kentucky Youth Advocates to advance the cause.
Reporter Alex Davis can be reached at (502) 582-4644.
