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Kansas Lawmakers Choose Not to Recommend Legislation on Payday Loans

Claudette Humphrey speaking to the committee Wednesday. (Photo by Stephen Koranda)

Kansas lawmakers considered tighter rules on payday lending during a committee meeting Wednesday, but they ultimately decided not to recommend more regulations for the short-term loans.

Republican Senate Vice President Jeff Longbine chairs the Special Committee on Financial Institutions and Insurance. He said Kansas officials should wait to see the effects of federal regulations recently released on the issue.

“I think it’s prudent at this point to wait and get a full digest and allow people time to see what the ruling says, what the ramifications in Kansas are,” said Longbine, an Emporia Republican.

Some members of the committee weren’t happy with the lack of action. Republican Representative Randy Powell of Olathe said the industry needs more regulation.

“I’m not a big government guy. I don’t like to see unnecessary regulation, but when you’re looking at 270 percent, 330 percent interest … they walk into these things having no idea what they’re getting into,” Powell said.

The committee could have recommended legislation for lawmakers to consider when the session starts in January. The bill before them to cap interest rates and add other requirements to short-term loans will still be available for consideration.

Alex Horowitz, a research officer with the Pew Charitable Trusts, told the committee that small loans can be a useful service for people — within limits.

“They can help people get through difficult stretches, but only if structured appropriately at affordable prices,” Horowitz said.

He noted that the short-term loans often carry high interest rates, which can mean that, for example, someone borrowing $300 for a five-month period would have to pay back a total of $750.

Claudette Humphrey used short-term loans in the past. She now works with Catholic Charities of Northern Kansas on a program that helps people get out from under that type of debt.

“People who live on fixed incomes and limited incomes are our most vulnerable,” Humphrey said. “I understand that maybe they didn’t pull themselves up by the bootstraps as some people think they can, but sometimes you don’t have bootstraps.”

Brad Smoot is with Anderson Financial Services, which runs LoanMax Title Loans. He said the bill the committee was considering could kill the industry, taking away an option for people who need short-term cash.

“It’s a good alternative to other lending options or no lending options, which unfortunately some people are faced with,” Smoot said.

Whitney Damron, who spoke to the committee on behalf of the Kansas Consumer Financial Services Association, said decisions about the loans should be left up to Kansans.

“Customers of payday loan lenders are qualified to make financial decisions for themselves without government interference,” Damron said.

Longbine said one issue people often don’t recognize is that ballooning interest costs are usually caused by having the short-term loans reissued over and over.

“Oftentimes, the companies are blamed for the cost of the loan, when had the loan been repaid on schedule, the cost would have been minimal,” Longbine said.

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