Payday Lending Costs Iowans $37 million a year, new report finds
Payday lending fees cost everyday Americans $3.4 billion every year, including $37 million in Iowa
Iowa CCI members call on Iowa legislators to take action by passing interest rates caps
The Center for Responsible Lending just released a scathing report about payday lenders and the predatory nature of their high fees and interest rates in the United States, and found that payday lending fees – above and beyond the original loan amount – cost everyday, hardworking Americans $3.4 billion every year. http://www.responsiblelending.org/state-of-lending/reports/10-Payday-Loans.pdf
In Iowa alone, individuals paid over $37 million in fees in 2012. According to the report, there are 218 payday loan operations in Iowa. Each one averages 3, 904 transactions every year.
Iowa is one of 29 states without meaningful regulation, despite popular public support of regulation of payday lenders. Payday lenders trap people in a cycle of debt, near impossible to escape. 90 percent of payday borrowers go to individuals with 5+ loans per year. Fees and penalties add up to an annual interest rate near 400 percent.
Lacking legislation at the Iowa Statehouse, cities have taken action under the leadership of local Iowa Citizens for Community Improvement (Iowa CCI) members. Seven cities – Des Moines, West Des Moines, Clive, Ames, Iowa City, Cedar Rapids and Windsor Heights – have already passed local ordinances that restrict where payday lenders can locate. Since the first ordinance was enacted, we have seen an almost 20% drop in payday loan shops in Iowa.
The Center for Responsible Lending states the strongest approach to regulating payday lenders is setting maximum APRs to eliminate the debt trap, generally 36 percent. For years, Iowa CCI members have pushed Iowa legislators for legislation to cap interest rates at 36 percent but legislators in both parties have failed to act.
“I have young family members who have taken out these loans and have gotten trapped in a cycle of debt,” said Robin Ghormley, an Iowa CCI member from Des Moines. “It is outrageous that all of this money is going to out of state corporations and I think it’s past time that Governor Branstad and the Iowa legislature crack down on predatory payday lending by passing strong interest rate cap legislation during the 2014 session.”