Debating the Rate Cap

Posted On: February 18, 2010 at 10:09 a.m.

Filed Under: advance business cash advance lobbyists

Lobbyists for the cash advance industry are insistent that a rate cap would put most payday loan stores out of business. It is hard to know, however, if this is the case. We all certainly would like to see rates be as low as possible. In Kentucky, it looks like a new government official is trying to put a cap on the industry: “Joining Owens in the effort is the Kentucky Coalition For Responsible Lending and 50 other non-profit organizations. They claim payday loans with high interest rates create a “debt trap” that loan takers cannot escape. [[ads]] A lobbyist representing the cash advance businesses, Scott Jennings, claims if the rate cap at 36% percent is enacted cash advance businesses would have to close. However, 15 other states have created rate caps or eliminated interest rates completely. In Ohio the rate cap is 28% and businesses continue to operate there” (http://www.wkyt.com/home/headlines/83836062.html). This makes me wonder how beneficial these caps might be. What if they were to really put these companies out of business? Where would cash-strapped consumers (particularly with bad credit) go for help?

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