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KY Group Says New Poverty Numbers Show Need to Curb Predatory Lending

September 11, 2009

FRANKFORT, Ken. - New numbers from the U.S. Census Bureau show the national poverty rate at an 11-year high. The group, Community Action Kentucky, puts some of the blame on what is known as predatory lending; the practice by some lenders to impose abusive and unfair terms on typically low-income borrowers.

Executive director Kip Bowmar says his group and others are pressing for a new law at the state legislature.

"Presently, under Kentucky law, check cashing businesses can charge 391 percent annual interest and we're working with a coalition of approximately 45 groups to put a 36-percent rate cap on what check cashers can charge."

The recession is plunging more people who do have jobs into poverty, says Bowmar.

"The majority of people in poverty who can work, do work. In fact, many of them work two and three jobs. The problem is that a lot of them are in jobs that don't provide health insurance or other benefits or don't pay a living wage."

The new Census figures also show that nearly 32 percent of American families spent at least two months in poverty between 2004 and 2007, he adds.

"I think it does show that, in addition to being able to provide basic emergency services, we also need to be able to provide additional education and training and case management to help people to be ready for a better job when the economy does turn around."

15 other states have passed similar legislation against predatory lending practices. Those in the pay-day check cashing business argue they provide a service to high-risk individuals that traditional banks don't, and they have the right to charge higher interest rates. Opponents of the measure in the legislature say limiting the interest rate will drive check cashers out of business and send those who need money into the arms of other predatory lenders who don't cap the amount they lend.

Tom Joseph, Public News Service - KY