This session, the Kansas Legislature failed to consider legislation imposing restrictions on payday lending. In effect, that points to a failure among legislative leaders to protect vulnerable citizens of this state.
A recent account on CJOnline.com told the sad tale of Bill Coffman, a veteran who struggles with bipolar disorder. The theft of $700 prompted Coffman to turn to a high-interest predatory vendor. For the repayment of a $500 loan, Coffman forked over $1,100. A second loan, for $376, accrued interest of $7 a day, or $210 a month.
Like many who rely on payday loans for a quick infusion of cash, Coffman could not repay the initial loan with his next paycheck. That triggered the loans to roll over with additional interest imposed and additional debt for the borrower.
Fortunately for Coffman, he was able to seek relief through the Kansas Loan Pool Project, an initiative of Catholic Charities of Northeast Kansas. The program helps qualified borrowers attain loans through banks with which it partners. The loans carry a much more manageable 6 percent rate. Capital City Bank is the Topeka institution involved in the program.
Interest rates as high as 391 percent have been slapped on Kansans who resort to payday loans. There is additional risk for those lenders since the signature loans are made without collateral.
However, exorbitant rates still prey on poorer citizens who often have nowhere else to turn when faced with a financial pinch. Two-thirds of payday borrowers in the U.S. have been found to take out seven or more loans per year, with much of that money used to pay for necessities such as food, gas and utilities.
A bill was introduced in the Kansas Legislature in 2017 that would have limited the annual interest rate on payday loans to 36 percent. Lenders would have been prevented from charging a monthly fee any higher than 5 percent of the principal. The measure did not make it out of committee and remained dormant this year.
Distressed Kansans, meanwhile, continue to get bilked with overly penal rates when they cannot meet the terms of their original payday loans. Shame on lawmakers for continuing to allow this sham to go on.
Give credit, though, to Catholic Charities, and institutions such as Capital City Bank, for facilitating a program that helps the vulnerable find a more viable method to pay for basic necessities and avoid the catastrophic cycle of debt that can accumulate on payday loans.