Attemts to change ayday lending legislation in Kentucky

There is a special legislation concerning payday lending industry in every US State. The particular feature of payday loans is their high percentage rates. That is why these loans are eliminated in a number of States. In 2009 legislators of Kentucky adopted a new law regulating payday lenders’ activities and aimed at protecting the State borrowers. In accordance with Stat. Ann. 286.9-010 et seq. (the name of this law) payday lending is allowed in Kentucky. But there are a significant amount of restrictions and limitations regarding financial charges, fees, loan amounts and terms of payment in the legislation. In addition, only payday lenders who are able to cash checks are allowed to operate in the State. For other lenders access to the industry is closed.

In May, 2010 the State authorities introduced a database which includes all the details about payday lending companies in Kentucky. This database is one of the specific features of payday loans legislation in the State. With its help governors can keep records and control all payday operations and transactions and if it is needed get all the necessary information about loan sums, charges, interest rates, terms, etc. Payday lenders have negatively reacted to this change, as now every operation they conduct will we disclosed to the legislators and they won’t have a chance to evade a law any more.

Under the Kentucky legislative acts maximum two payday loans can be borrowed at the same time every 14 days. For a fortnight term a borrower can apply for a loan which sum doesn’t exceed $500. Fees not more than $15 can be established for a $100 loan. The lending period ranges from two weeks to two months. $17.65 is the maximum amount of financial fees that a lender is allowed to charge a borrower for a loan making up $100. So, an annual interest rate for a fortnight $100 loan amounts 459%. All rollovers and extensions are considered to be illegal in Kentucky; thereby payday borrowers should pay off their loans on the due time. Cooling-off period is strictly prohibited, and a person can borrow a new loan only after repaying the old one. There is a certain regulation concerning collections, i.e. just one NSF fee can be charged for a loan in case a borrower has defaulted on his repayment. The sum of the fee is determined. Payday lenders are forbidden to prosecute their customers in any situations.

In 2010 the State legislators were about to introduce a new bills relating to payday loans. The bill suggested decreasing the interest rate that can be charged for taking a payday loan to 36% per year. There were negotiations about passing the bill in the House of Representatives of Kentucky in 2011. However Insurance and House Banking Committee have refused to adopt the document. In case the legislation was changed, Kentucky would enter a group of 18 States (including Washington DC) where payday loans have already been eliminated. But 10 electors voted for and 13 voted against passing the bill. As a result, the Kentucky payday loans legislation hasn’t experienced any changes yet


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