A measure that would cap interest rates on all payday loans and cash advance transactions at 36% might never get a hearing in the Democratic-controlled House, despite the backing of Democratic Gov. Steve Beshear. Banking and Insurance Committee Chairman Jeff Greer said he has not decided whether he will hear House Bill 381, a measure that has 19 co-sponsors and the support of more than 50 social service groups.
Greer, D-Brandenburg, said Monday that he would first like to hear more about a database that was approved in 2009 to track all payday loans in Kentucky. The database would be used to determine whether people were receiving more loans than the law allows. Rep. Johnny Bell, D-Glasgow, who sponsored the data base bill, said the law called for work to begin on the database last summer but did not set a deadline for when the system must be operational. Greer and Bell both said Monday that they understand the system should be ready this summer. Greer said he would like Department of Financial Institutions Commissioner Charles A. Vice to update his committee on the database. Specifically, Greer said, he would like to know what type of information the database will generate before he decides whether to hear the proposal to cap interest rates. Those who back the interest-rate cap say there’s no reason to put the bill on hold until the database is operational. “That data will do nothing to lower these interest rates that can be more than 400 percent,” said Rep. Darryl Owens, D-Louisville, the bill’s sponsor.
Payday loans snare many people in a cycle of debt as they take out one loan to repay another, say proponents of the bill. But payday lenders say they offer a needed service for people whom traditional banks won’t serve. Their industry keeps people from losing their homes and helps put food on the table, they say. Beshear, a former payday lobbyist, applauded the proposal Monday. “This legislation is the right move to protect families, especially in these difficult economic times,” he said in a written statement. House Speaker Greg Stumbo, D-Prestonsburg, also has said he supports the measure. The article was written By Beth Musgrave.
