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Conference Supports Cap on Payday Loans29 Jan

Take Action: Call 1-800-372-7181 and ask your legislators to support HB 332 when they have the opportunity to vote for its passage or in a committee meeting.

On Friday, January 27, Rep. Darryl Owens introduced House Bill 332, which would cap the interest rate on payday loans at 36%. This bill is virtually identical to HB 182 in the 2011 Session. In addition to the interest rate cap, HB 332 would require payday loan companies to disclose in a prominent way the effective interest rates being charged and would bring this industry into a regulatory environment similar to that of other lending institutions.

Conference Position

The Conference supports HB 332 . Catholic Social Teaching is very clear that banking and lending are important services and can contribute to the common good, but such practices can easily lead to usury. The state has a role to play in protecting consumers, especially the poor, from predatory lending practices. As Pope Benedict XVI said to European bankers in 2010, “Economics and finance do not exist for themselves, but are mere instruments or means. Their end is solely the human person and his full realization in dignity. This is the only capital worth saving.” Honest and fair lending practices lead to job creation, economic growth, home ownership, and many other good and important things. Predatory lending and usury lead to the unjust enrichment of a few on the backs of those with the least to lose.

Also, payday lending often creates a debt trap which is very difficult to break out of. According to the payday lending database mandated by the state, there are two million transactions each year in Kentucky, with an average of 1.7 transactions per customer per month. Clearly, for many people, this is not an occasionally used product, but is a means of financing routine monthly expenses. It is for these regular users that the high effective interest rates become a tremendous burden.

The coalition supporting HB 332 continues to grow. The Catholic Conference is especially pleased to be working alongside our brothers and sisters in the Kentucky Baptist Convention, which has recognized the exorbitant Interest rates charged by payday lenders, often totaling 400%, to be usurious.

Here is an op-ed by some Lexington, KY pastors that the Lexington Herald Leader published: Payday lending entraps people.

Action

Call 1-800-372-7181 and ask your legislators to support HB 332 when they have the opportunity to vote for its passage or in a committee meeting.

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