Payday Loan Interest Rate Restriction Vote Worth Voters’ Support | Comment

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Hopefully few voters across Nebraska have firsthand knowledge of why Initiative 428 is on the November 3 ballot.

Those who do will certainly support it.

Indeed, a ‘yes’ vote for the proposal, which is officially known as the Payday Lender Interest Rate Cap Initiative, would support limiting the annual interest charged for deferred deposit services – also known as payday loans. – to 36%.

If a majority of voters give their approval, the initiative would become a new state statute. It would replace the state’s current payday lender law, including a ban on charging fees over $ 15 per loan and a loan limit of $ 500.

Some alarming figures from the 2019 Deferred Deposit Services Annual Report produced by the Nebraska Department of Banking and Finance reveal why support for the initiative is warranted. The report showed that the average loan amount was $ 362 and the average annual percentage rate taken on was 405%. The total number of transactions for the year was 507,040.

Let’s say you borrow $ 500 for two weeks at a rate of 391%. The loan requires you to repay $ 575 ($ 15 per $ 100 borrowed multiplied by 5) 14 days later.

And you thought up to 30% interest on credit cards was not compliant.

According to Ballotpedia, 37 states allow payday loans, including Nebraska. The Federal Reserve in St. Louis said more than 12 million Americans, mostly poor consumers without access to credit cards or bank loans, are sadly turning to payday lenders to solve short-lived financial problems. term. In 2019, they borrowed $ 29 billion and paid $ 9 billion in fees to do so.

Initiative 428 represents the latest effort to minimize the damaging effects of payday loans since their introduction in Nebraska in 1994.

In 2006, for example, state senators banned loan renewals. In 2016, an attempt was made to limit payday loan interest rates to 36%, but this failed to generate enough support. Then, in 2018, Bill 194 became law that closed a loophole that payday lenders were using to bypass regulatory limits. LB194 imposed reporting obligations on payday lenders and also imposed an obligation to provide borrowers with a short-term payment plan.

Initiative 428, however, represents what is the most significant change that has been proposed since 1994. If approved, it will serve as a necessary means to protect vulnerable Nebraskans. This is why a vote in favor of Initiative 428 on November 3 is deserved.

Next Friday: Different philosophies on education – and who should pay for it – are part of the 2020 election.

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