OTOC Leaders Testify against Payday Lending expansion at State Legislature

Rod Kuhlmann (left) of Holy Name Church and Kevin Graham of First United Methodist Church presented testimony on behalf of the OTOC Payday Lending Action Team to the Banking, Commerce, and Insurance Committee of the Nebraska State Legislature on Mar. 12, 2019, at the State Capitol.

Kuhlmann testified against LB 379, which would expand payday lending in Nebraska by permitting lenders to make loans online as well as in person. Graham testified against LB 265, which would create a new class of delayed deposit loan services for loans with larger principal amounts and with longer terms.

Kuhlmann and Graham both presented OTOC’s position that payday lending requires reform, not expansion, in Nebraska. Neither LB 379 nor LB 265 address the core problems of payday lending:

  1. The State Department of Banking reports that payday lending borrowers in Nebraska paid an average Annual Percentage Rate of 404% on their loans in 2017; and
  2. The State Department of Banking reports that borrowers renewed their payday loans an average of 11 times in 2017, paying a fee of $53 each time, because they could not repay the entire loan amount in 2 weeks.

Please contact the following members of the Banking, Commerce, and Insurance Committee to ask them to vote AGAINST advancing both LB 379 and LB 265 to the full legislature:

Sample message:

Senator  (Last Name):

On March 12, 2019, the Banking, Commerce and Insurance Committee held public hearings on pending legislation LB 265, adoption of the Unsecured Consumer Loan Licensing Act and LB 379, Change provisions under the Delayed Deposit Services Licensing Act.  The main provisions of LB 265 would increase the limit of Payday Lending loans to $1000, extend the repayment periods and add maintenance fees.  LB 379 would allow unlimited online Payday Lending throughout the State.

These two bills would make available two new products for Payday Lenders to use in the marketplace and put borrowers at greater risk of being caught up in a cycle of debt lasting months or years.

Representatives of Omaha Together One Community (OTOC), Nebraska Appleseed, AARP and many others testified at the hearing in opposition to these bills.

I ask you to vote NO on advancing LB 265 and LB 379.

(Name)

Payday Lending Issue Cafe

35 leaders met at Urban Abbey on February 28 to hear from Ken Smith, lawyer with Nebraska Appleseed about the state of payday lending in Nebraska. With the passage of LB 194 in last year’s legislative session, a few small steps were made to close a loop hole that could allow payday lenders to register as “Credit Service Organizations,” give a once-a-year payment plan option, and require more reporting to the Nebraska Department of Banking. The first report came out in December 2019 (view it here). See our analysis here of what this report shows about the status of where payday lending happens, how many loans are made, what people have to pay, and the average percent rate of 404%.

Ken Smith also asked supporters to practice how to respond to common arguments for payday lenders:

  1. Payday lenders offer a valuable service to people who can’t go to other lines of credit.

Response: This is a good notion, but the issue is that fees are too high and don’t follow the basic parameters of other loan products. There is a lack of transparency in what you are signing on to and what your options are.

  1. There are no alternatives to these types of loans

Response: There are some loan alternatives from some credit unions and nonprofits. See the Community Hope FCU in Lincoln and a nonprofit start-up in Omaha (still working on getting their credentials to offer low-interest loans)

  1. Government should not make a habit of putting an industry out of business. The market should regulate itself.

We are not trying to put payday loans out of business, but just putting in reasonable requirements on loans. If you can’t meet those requirements, maybe you shouldn’t be in business. The Legislature actually exempted these companies from usury laws, which all other lenders have to follow, so we just want payday lenders to follow the same rules as everyone else.

Visit Pew Charitable Trust to learn more about efforts to reform payday lending around the country.

 

 

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