Lawmakers in Lincoln Hear about Payday-Lending Bills
LINCOLN, Neb. – State lawmakers heard testimony Tuesday on a bill that would beef up consumer protections in the payday-lending industry.
While current Nebraska law allows payday lenders to charge borrowers up to 461 percent annual interest, Legislative Bill 194 would put a 36-percent cap on interest rates.
Mark Intermill, advocacy director for AARP Nebraska, is among those who testified before the Banking, Commerce and Insurance Committee. He explained that folks struggling to make ends meet can get trapped in a cycle of debt with payday loans.
"If we could set some limits on what it costs to service the loans, we would probably see more loans that do get paid back and that don't go into default, and I think just make it a little bit easier for those individuals trying to make ends meet," he said.
Intermill shared a recent AARP survey with lawmakers, which says three-fourths of Nebraskans over age 18 are in favor of the 36-percent cap on interest rates.
The committee also heard Legislative Bill 286, which would establish a new type of loan with longer terms and lower interest rates, but leave payday lending unchanged.
Supporters of the payday-lending industry say it provides a needed service not offered by traditional lenders. Intermill agrees these short-term loans can sometimes be helpful in an emergency, but says the reins should be tightened.
"LB 194 will allow the payday lending to continue to function, but with just some additional restrictions," he explained. "And I think that's an important factor in this, in trying to develop legislation that might be in the best interest of everybody concerned."
LB 194 would also limit fees collected to half of the original loan amount, limit monthly loan payments to no more than five-percent of a borrower's gross monthly income, and require payday lenders to post all fees at their offices.