Nevada and federal agencies consider payday and title loan limits
Federal regulators are taking steps to rein in high-cost payday lenders, and state officials are studying ways to do the same.
The Consumer Financial Protection Bureau, meeting in Kansas City on Thursday, proposed new limits on interest rates and rules that would make it harder for lenders to seize cars used as security for so-called title loans. One proposed rule would require the lender to assess the borrower’s ability to repay the loan before making it.
Nevada state Treasurer Dan Schwartz, meanwhile, has called a June 8 summit meeting to discuss state-level payday loan regulation and preventative measures. The session, which is not open to the public, representatives of lenders and consumer advocates.
Nevada has no limits on payday loan interest rates. Lenders charge, on average, 652 percent annual interest, according to a Center for Responsible Lending map of U.S. payday loan interest rates.
Payday loans, a $50 billion-a-year industry nationwide in 2014, often take the form of small, short-term cash advances at high interest rates. These loans tend to be the last resort for people with poor credit ratings and low incomes. Often, borrowers cannot pay on time and must roll over the loan, incurring even higher costs — a situation consumer advocates call a debt trap that the borrower can never escape.
According to a report on payday lending from the consumer agency, more than 80 percent of cash-advances are rolled over or followed by another loan within 14 days.
Attention to the issue is “definitely a good first step,” said Aj Buhay, field director for Progressive Leadership Alliance of Nevada.
“We want to send a clear message to the CFPB that we support them in regulating the industry,” Buhay said.
“If the Treasury starts moving on this issue we want to support them too, in making sure that Nevada won’t be one of those states that does not have regulations for this industry.”
Some Nevadans have gotten into trouble.
“Through our financial literacy programs we have heard many heartbreaking stories of how Nevadans get caught up in these types of loans,” said Grant Hewitt, the treasurer’s chief of staff. “Some of those stories have involved gambling, but at this time, we do not have any statistics on the size of that percentage.”
Often, payday lenders are strategically located in low-income neighborhoods, according to a study by the Federal Reserve Board.
“Most if not all who use these loans end up in a worse place than where they started financially,” Schwartz said. “This summit will discuss the issues involved, where Nevada stands in comparison with other states, and what actions could be taken in the next legislative session.”
The issue has already caught the attention of the internet search giant Google, which recently announced it will stop taking advertising from payday lenders in mid-July.
Contact Tatiana Villamil at email@example.com or 702-383-0264. Find @tatianavr92 on Twitter.