After new payday rule comes into force Kansas authorities should review their politics on payday lending industry and cut off predatory profits some of them receives.
October 11th, 2017 special legislative committee debated over new payday loan law which would set the bar on interest rates payday lenders can use in Kansas at 36% annually. Law affects additional fees too, limiting them to $20 a month or 5% of the credit amount (depending on which amount is smaller). The committee members have not provided their decision till today, they have asked for more time to review new rule’s influence on lending industry before making rough steps.
On October the 5th the CFPB has published new rule for lenders concerning payday loans, car title loans, short-term credits and long-term loans with balloon payments. These guidelines will be severe for payday industry in Kansas as their output in 2016 was $300 million and profit equaled 391% per year.
Uniform Commercial Credit Code regulates all high-profit short-term lender business in Kansas. Due to this Code each payday loan can’t be more than $500, can’t last more than a month and cannot be charged more than 15% interest per year. Penalty fees are limited by 3% monthly for overdue credits. One person cannot borrow more than one credit at a time without confirming their income and more than three credits in a month’s period.
Generally, payday loans are meant to prevent borrowers from financial collapse in case or unplanned expenses. Loan amounts can variate between $100 and $1000. This type of loans designed to be returned as soon as borrower received their next paycheck.
But 40% of borrowers cannot afford returning credit on a due date because their income is never sufficient and their financial crisis in not temporary (in the majority of cases); they are trapped in debt circles. This low-income group of people takes new loans to pay for the old ones, and for each new loan they are charged astronomical amounts of interest and fees.
The Consumer Finance Protection Bureau together with Catholic Charities of Kansas have stood out on Wednesday for the protection of the rights of American families that had borrowed loans they can’t return due to their low incomes.
Surely the industry lobbyists are against the new payday loan guidelines. They risk of loosing a considerable part of their income is high, indeed. But the rule still provides lenders with agreeable interest rates and fees on payday loans.
For Kansas families who lacking cash from time to time new payday rule is a guarantee against a financial disaster. The new rule is likely to be implemented in 2018. And it is all done for well-being of American citizens.