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Ballot Measure Aims to Protect Against Predatory Lending Practices

Nearly 65% of payday loan storefronts in Nebraska are owned by out-of-state corporations. (Tony Webster/Wikimedia Commons)
Nearly 65% of payday loan storefronts in Nebraska are owned by out-of-state corporations. (Tony Webster/Wikimedia Commons)
October 1, 2020

RALSTON, Neb. -- If voters approve Ballot Initiative 428 in November, payday lenders say most operators would be forced to shut down, leaving Nebraskans with poor credit no alternatives when they need emergency cash.

But proponents argue charging more than 400% interest is predatory behavior that can trap families in an endless cycle of debt.

Aubrey Mancuso, executive director for Voices for Children in Nebraska, said current payday lending practices put the state's most vulnerable families at risk of increased overdraft fees, lost bank accounts and even bankruptcy.

"Instead of relying on a borrower's ability to repay, they rely on having direct access to a person's bank account," Mancuso explained. "The lenders get paid before food, before rent, before any of the other basic necessities that families need."

Initiative 428 would cap interest rates at 36%, the same rate passed by Congress for active-duty military families after reports that mounting debt from payday loans was impacting military readiness.

Industry groups say 36% is not enough to offset losses from people who can't repay their loans.

Mancuso pointed out some Nebraskans are at greater risk of falling into debt through payday lending.

"A lot of our borrowers are single women with kids," Mancuso said. "A lot of these facilities also target communities of color, veterans in particular, people with high health-care costs, people with disabilities; the elderly as well."

Mancuso noted in the 16 states that have passed similar protections, families find better short-term alternatives. They borrow from friends, tap credit cards, or cut back on expenses.

"What we find from research is that families go to those other options that may not seem as convenient in the moment as a payday loan, but ultimately leave them better off in the long term," Mancuso added.

Ballot initiative 428 was launched after Nebraska lawmakers decided not to pass similar protections in the Legislature.

Eric Galatas, Public News Service - NE