Nebraska petition aims to cap interest rates charged on payday loans

Faced with too much month left at the end of the money, some people opt for a payday loan.

But that can turn into an expensive proposition, and an organization in Nebraska aims to make it a little less so.

A group called Nebraskans for Responsible Lending has mounted a petition drive to put on November’s ballot a measure that would cap interest rates charged by payday lenders — rates that can sometimes exceed 400 percent annually.

Among those signing onto the effort is Nebraska AARP.

Devorah Lanner, communications director for Nebraska AARP, said her organization has been concerned about the issue for a while.

In fact, in 2016, AARP surveyed Nebraskans 18 and older about their view of the state’s payday lending laws. Among the survey’s findings were that respondents favored:

Capping payday lending rates to less than 25 percent annual percentage rate (68 percent);

Ensuring that monthly fees are an affordable share of monthly income (72 percent);

Limiting total fees collected on a loan to 50 percent of the original loan amount (over 60 percent);

Requiring payday lenders to prominently and clearly display all fees for consumers (90 percent).

National statistics on seniors and payday loans are striking, Lanner said. The number of Americans 62 and older taking out such loans tripled from 2015 to 2016, and nearly a quarter of payday loans are made to people in that age group.

Melanie Clark, director of NRL’s campaign, said most payday loans are for $500 or less for a term of one to two weeks. The lender takes a check from the borrower. The lender gives the borrower the money, minus a service fee.

Payday lenders take the borrower’s bank information and deduct loan payments directly from that account. If the borrower doesn’t have the money to pay the loan back by the end of that two-week term, the borrower takes whatever money is available directly from the bank account.

If that happens, borrowers “get themselves into a cycle,” Clark said. “‘I don’t have the $100 that I owe, plus the interest rate; I only have $50. Now I have to take out a second payday loan.’” That often happens up to 10 times for a single loan, Clark said.

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