The Richmond Register

State News

February 8, 2011

Payday lenders targeted for interest rates

FRANKFORT — Mary Love doesn’t look the part. A retired pastor and former employee of UPS Logistics from Oldham County, Love, 65, found herself retired, divorced and trying to live off “a small pension.” Soon, she found herself in a “debt trap.”

It began when one month she was a bit short and her rent was due. She visited a “payday lender,” and wrote a $230 check that the lender held for two weeks. She walked out with $200. But two weeks later she owed the lender $230 and still couldn’t make ends meet. This time she wrote a check for $460 and left with $400.

Love ended up with 24 separate loans over a year, each for the same $400 on which she paid $1,450 in fees.

“It was a cycle of paying $60 every two weeks to leave with that same $400,” Love said. “None of those fees I paid ever counted toward the loan amount.”

Love told her story Monday in Frankfort at a press conference to urge lawmakers to pass a 36 percent annual percentage rate cap on payday loans — 17 other states, the District of Columbia and the U.S. Military have similar caps. Rep. Darryl Owens, D-Louisville, is sponsoring the bill for the third consecutive session but hopes this time to get the bill out of committee. He said committee chairman Jeff Greer, D-Brandenburg, has promised to give the bill a hearing a week from Wednesday.

In 2009, the legislature passed a bill sponsored by Johnny Bell, D-Glasgow, to require lenders to report all payday transactions so the state could track the data. Since the database became operational in May 2010, it indicates the average customer of payday lenders takes out 8.6 loans per year and 83 percent of payday lending revenue in Kentucky is generated by borrowers with five or more loans, Owens said.

Worse, in Owens’ opinion, 13.3 percent of transactions were with social security recipients who used their social security checks as collateral. He called payday lending a “toxic and predatory practice.”

The industry disagrees. Patrick Crowley, spokesman for the Kentucky Deferred Deposit Association, said the industry employs 2,000 in Kentucky, pays rent on 6,000 retail sites and serves 180,000 customers who need the service.

“We’re convinced there’s a need for this product,” Crowley said. Without it, he said, many of those 180,000 will turn to credit cards and unregulated Internet loans. Asked about Love’s experience of having repeatedly paid fees for the same $400 loan and the data indicating the industry gets most of its revenue from repeat customers, Crowley said, “Maybe they’re satisfied. I get charged for each ATM transaction, but I continue to use the service.”

But this time, proponents of the cap have some additional data — a poll conducted by Washington, D.C.-based NTS Research for the Kentucky Coalition for Responsible lending. According to the poll, 48 percent of Kentucky voters would be more likely to vote for a legislative candidate who supported the cap and only 8 percent less likely. About 45 percent said it doesn’t matter.

Only 9 percent of respondents opposed implementing a statutory cap while 73 percent support the cap — 18 percent are undecided.

The industry is fighting back of course. It’s expected to lobby lawmakers hard.

“There has been a significant amount of money spent by the payday lenders,” Owens said. “And I don’t know exactly how that’s going to play out.”

Gov. Steve Beshear, who once lobbied for the industry before re-entering politics and who has received campaign contributions from people connected to the industry, supports the cap, his spokeswoman Kerri Richardson said. One of the bill’s 20 co-sponsors is House Speaker Greg Stumbo, D-Prestonsburg, who said Monday the information collected through the statewide database is persuading some lawmakers it’s time for a cap. Owens thinks it’s past time.

“It’s sinful, it’s immoral and we in the legislature need to do something,” Owens said.

Ronnie Ellis writes for CNHI News Service and is based in Frankfort. He may be contacted by email at Follow CNHI News Service stories on Twitter at

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