The Homeless and Housing Coalition of Kentucky (HHCK), an NLIHC state coalition partner, has partnered with a broad coalition of advocates to support passage of H.B. 182, legislation to cap payday loan interest rates at 36% in Kentucky. Although the state House Banking and Insurance Committee voted against the bill (13-10) in February, advocates count this as advancement because the issue received more legislative support this year than in previous years.
For several years, housing, domestic violence, senior, faith based, family, and youth advocates, lead by Kentucky Coalition for Responsible Lending (KCRL) have worked to reform the state’s payday lending industry. Advocates accuse the industry of targeting vulnerable Kentuckians by setting up business in poor neighborhoods and offering customers loans they cannot afford to repay.
During the 2010 legislative session, a bill was passed to limit borrowers from rolling over loans, and to authorize an electronic database to collect information on payday lending trends. The database shows that from May to September 2010, 83% of the payday loan industry’s revenue in Kentucky was generated by borrowers who took out five or more loans, despite the new rollover law. Advocates believe this trend exists because borrowers, after paying off their loan, are unable to pay their living expenses, and have no choice but to take out another loan. With annual interest rates on these loans reaching nearly 400%, housing advocates in particular are concerned because the payday loan borrowing cycle perpetuates housing vulnerability among households that already struggle to pay rent.
Advocates established a grassroots effort to develop support for H. B. 182, which included outreach to each organization’s networks by email, phone, and the internet to provide updates on major developments of the campaign, and to keep them apprised of the right times to contact their state legislators. KCRL reached out to the state’s Consumer Advisory Committee for support on payday lending reform, which resulted in an endorsement from the committee. The endorsement was sent to the General Assembly.
An opinion poll was developed by KCRL to gauge Kentuckians’ support for the legislation. The results, which yield support for a 36% interest rate cap among 73% of poll voters, were used to urge legislators to vote for the cap. Advocates also utilized media, receiving positive attention from two local newspapers.
The payday lending industry mounted significant opposition to the legislation. In addition to hiring lobbyists to build support for their industry, payday lenders made significant financial contributions to both political parties.
“Advocates for fair lending practices are regrouping and will back at work during the 2012 General Assembly to get this cap passed,” said Penny Young, HHCK Executive Director. “Our will to do the right thing has not been broken.”
For more information contact: Penny Young, HHCK Executive Director, email@example.com