Report Looks at Cost of Payday Loans in Kentucky
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February 24, 2010
FRANKFORT, Ky. - Members of the Kentucky Coalition for Responsible Lending released a yearlong study Tuesday on the economic impact of payday lending across Kentucky's 120 counties. The report concludes payday loans are damaging the state's economy.
Report author Melissa Konty, research and policy associate at the Mountain Association for Community Economic Development, says payday lending has become widespread in the state.
"More than three million loans were made in 2008 to Kentuckians who paid more than 400 percent in interest on those loans. So, we see a huge problem with payday lending in the state of Kentucky."
The study points out that payday lenders operate in cities and rural areas. Mapping store locations, however, reveals that lenders often locate their businesses in targeted neighborhoods, according to Konty's research.
"If you look at a map of Louisville, they are stacked one after the other along major thoroughfares, and are more concentrated in the low-to-moderate income areas than in wealthy communities. We see the largest number of payday lenders in our urban communities but, when we look at the number of locations per 10,000 residents, we also find that more rural counties – such as Mason, Madison and Perry – actually have a higher concentration of lenders, and of debt."
Payday lenders refute the study, saying their industry is committed to protecting consumers while offering a necessary service for short-term borrowers. The Kentucky Coalition for Responsible Lending, representing 64 organizations, argues that the money paid in high loan interest rates is effectively being taken from local communities that could put it to better use.
The group says the study makes a strong case for a 36 percent cap on payday loans, as proposed in House Bill 381. The legislation remains in the Banking and Insurance Committee, awaiting action by the committee chair.