Midlands Voices: Nebraskans Should Exceed This Required Limit For Payday Loans | Columnists
But payday lenders work differently. They guarantee their own repayment by demanding legal access to their clients’ bank accounts, including the ability to transfer funds back to themselves in full with sky-high fees, regardless of whether the borrowers have the funds in their accounts or not – and whether or not the borrowers can pay rent or mortgage or buy groceries. This means that lenders actually have an incentive to lend to people who cannot afford it, putting borrowers into an endless cycle of loan extensions as fees and interest pile up.
Payday lenders rely on this model. They generate three quarters of their income from borrowers with more than 10 loans per year because the borrower cannot repay the initial loan in full quickly enough. This is a pretty shoddy way of doing business – ruining desperate families until they often can’t make ends meet and bankruptcy is the only option.
For far too long we’ve watched the annual interest rates in this industry climb to absurd averages of 400% – that’s more than 25 times what we pay for credit cards with the highest interest rate. It is wrong to exploit vulnerable people – including military veterans, colored communities, and seniors – and it’s not the Nebraska way. There is an urgent need for action by voters in November.
Sixteen states already have such a cap, with neighboring states like Colorado and South Dakota taking action in recent years. Military members on active duty are also already protected by an act of congress. It is high time the nation protects everyone else, including the critical workers who expose themselves to health hazards every day to make a living.