Tuesday, February 28, 2006

Kansas Bill to Protect Payday Lenders Never Gets Off Ground

By J.J. Cameron
Payday Loan Writer

Senate Bill 376 seemed relatively harmless … to the untrained eye. In reality, this was an attempt to erase existing protections that prevent the most vulnerable borrowers from falling prey to unending cycles of high-interest debt.

“The predatory lending industry is one of the fastest-growing industries in our country,�? said Sen. Chris Steineger, a Wyandotte County Democrat and member of the Senate Financial Institutions and Insurance Committee. “I’m glad to see this bill appears to be dead for the year.�?

Kansas lending laws are tougher than those of some other states, including Missouri. They restrict payday loan companies and other subprime lenders that cater to consumers with tarnished credit from renewing or extending short-term personal loans and charging an extra fee each time.

The practice, known as “flipping,�? chains borrowers to a cycle of revolving debt, as lenders charge higher fees again and again on the same loan.

The proposed bill would have changed Kansas law to allow companies to charge a fee equal to 10 percent of an entire payday advance each time it was renewed, along with other charges.

There is growing concern that these cash loans take advantage of the ignorant, poor or even disabled. According to resources 10,000 of Security Finance’s customers in Oklahoma are mentally or physically disabled, elderly, infirm or on fixed income.

“Essentially, Security Finance has developed a method to extract millions of dollars in state or federal aid that has been paid for by taxpayers for the benefit of the most vulnerable among us,�? he told legislators.

The loan of one elderly, brain-damaged woman was renewed 125 times over 10 years.

One branch manager testified she made loans to customers despite questioning their mental status. She said one customer had conversations with herself and appeared to have two personalities. The manager said that she was told, “We must renew everybody; it doesn’t matter,�? state records say.

Similar efforts by Security Finance to get laws changed to allow lenders to charge fees for renewing revolving personal loans have been shot down lately in Indiana and Arizona.

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