According to an article in the Lincoln Star Journal, Senator Kathy Campbell of Lincoln, Nebraska is proposing that the predatory practices currently used by direct payday lenders of payday loans be modified. The Nebraskan Legislature is suggesting that certain restrictions be put into the law.
LB1036 would require that payday lenders permit borrowers to pay back financing over time versus paying a lump sum in two weeks. The current law allows payday lenders to charge $75 on a $500 loan amount. That equates to an APR of 460%. The bill, sponsored by Campbell, would reduce the charge to around $10.00.
Lenders in the payday loan industry state that they are helping consumers obtain online payday loans with instant approval who cannot go to a traditional lender for help. The President of Nebraska Financial Services, Brad Hill, who is also a payday lender, commented on the stance taken by many payday loan lenders. He said, “Our customers really have nowhere else to go.”
When a similar bill was enacted in Colorado, payday lenders still turned a profit although many of the businesses went out of business. Nick Borne, who is a director at Pew Charitable Trusts, said that around 50% of payday lenders closed their doors under the 2010 Colorado law. The other 50% now service about double the customers at each location. Around 90% of the customers live in close proximity to a payday lending store.
As a result of the legislation in Colorado, residents are now spending around 40% less annually on payday financing. In turn, they have extra money for the basic necessities of life, such as rent, food and utilities. The bill proposed by Campbell is designed to remove some of the roadblocks imposed by payday loans – barriers that keep families at the poverty level, or living from paycheck to paycheck.
Borrowers who use payday loans should be in a financial spot to pay back the loan immediately. The loans are generally priced at a fixed dollar fee, which translates as the borrower’s payback amount. Because the loans are not collateralized and are of a shorter term, the cost of borrowing is exceptionally high. In return for the loan amount, the borrower normally supplies the lender with a debit authorization from his bank account or a pre-dated check.
business arrangements with Native American tribes and claiming that they possessed “tribal sovereign immunity.”
Currently, prosecutors in the case are attempting to seize property gained from the deceptive practices in the form of 6 Ferrari racing vehicles, a Learjet aircraft, several bank accounts and four Porsche automobiles.