(Indiana News Service) A new coalition is forming to fend off predatory lending and urge state lawmakers to take action to protect consumers.
Indiana has 286 payday loan stores, where people go to take out small loans with high interest rates, and borrowers are often low-income residents who cannot repay the loans and are caught in a cycle. debt.
Natalie James, one of the leaders of the Hoosiers for Responsible Lending coalition, said predatory lending has been a smoldering problem for years, and she noted that the pandemic has made many people more financially precarious.
“We aim to send a message to our federal and state lawmakers that a pandemic is not the time to allow lenders to take advantage of Hoosiers’ financial distress,” said James.
82% of payday borrowers take out another loan within 30 days of paying off the previous one. James noted that some states have reasonable caps on the Annual Percentage Rate (APR), the overall cost of funding these loans, including fees, but Indiana is not one of them.
Andy Nielsen, another leader of the coalition, said he supports legislation to cap the APR for payday loans at 36%. In Indiana, the current cap is 391%.
Nielsen explained, “36% APR is a long-standing rate that preserves a borrower’s ability to repay and allows lenders to always make a profit. “
Nielsen added that payday loans drain $ 60 million a year in fees for consumers in Indiana, and with a cap of 36% of the APR, they could save millions of dollars.
Sixteen states plus DC have already implemented similar limits, and a study in North Carolina shows that the absence of payday lenders did not impact the availability of credit for low- and moderate-income families. .