Payday News From Kentucky

People turn to borrowing when they are short of cash. Nowadays, payday lenders have their lion share in a loan market, together with banks, credit unions and credit card companies. But as it turns to be not every lender plays fair. That's why Congress and the Federal Reserve have acted to protect borrowers by strengthening protections against exorbitant overdraft fees and deceptive credit card charges.

Repeat borrowing and Predatory fees

According to the Kentucky Coalition for Responsible Lending, the overall payday lending profit in 2008 amounted to $158 million, collected from Kentuckians who have five or more loans a year. With an annual interest rate of around 400 percent, it's not surprising.

The state is going to limit easy payday loans borrowers to no more than two loans at a time. This step is likely to lower payday loans volume by about 20 percent. But will this measure be effective with regard to repeat borrowers who take out the next loan just to get by after having paid the exorbitant interest on their recent loan? Not much.

By Kentucky law no one can renew the loans. So, customers have to turn to repeat borrowing. The Center for Responsible Lending found that repeat borrowing makes 76 percent of all payday loan volume, which amounts to $24 billion of the $27 billion annual loan industry profit in the country. Again, with borrowers having to take out about five to nine instant payday loans no faxing a year or even more, it's not surprising. The reason is the failure to cover the debt and the resulting repeat borrowing.

Profits for political candidates

Payday lenders give part of their profits to support political candidates.  For example, the Kentucky Deferred Deposit Association has invested $49,000 to Kentucky state office candidates since 1998. Cash Express CEO Garry McNabb of Crossville, Tn. has given $17,000 since 2007.