Our view: Payday loan restrictions build support for interest rate caps

Espey: Payday loan restrictions build support for interest rate cap

by Hugh Espey, executive director of Iowa CCI Action FundThis commentary first appeared on the Des Moines Register's A Better Iowa site: http://abetteriowa.desmoinesregister.com/2012/09/27/espey-payday-loan-restrictions-build-support-for-interest-rate-cap/Last week, Iowa City joined Des Moines, West Des Moines, Clive and Ames by becoming the fifth city in the state of Iowa to crack down on predatory lending and restrict where payday loan shops can locate inside city limits.The local zoning laws – first proposed in each city by Iowa CCI members – limit new construction to specific commercial zones and establish separation distances between payday lenders and apartment buildings, churches, homes, parks, and schools.Payday loans are short-term usury loans with an annual interest rate near 400 percent. They trap thousands of borrowers in a cycle of debt and misery. And they strip our communities of hard-earned wealth – $36 million each year – that should be circulating in local economies, but instead pads the pockets of big out-of-state corporations.Cities across Iowa are doing what they can to crack down on predatory payday lenders, and now it’s time for the state legislature to follow suit by capping interest rates on payday loans at 36 percent. Lots of other states have done it.Unfortunately, legislation to do precisely that has been stonewalled by some powerful Senate Democrats.During the 2011 legislative session, Senate File 388 passed out of Senator Amanda Ragan’s (D-Mason City) Human Resources Committee, but was then moved by Senate Majority Leader Mike Gronstal (D-Council Bluffs) to the Commerce Committee, rather than to the Senate floor for a vote. That committee is now chaired by Senator Matt McCoy (D-Des Moines), who sat on the bill through the 2012 legislative session, effectively killing it.Assuming Democrats retain control of the Iowa Senate this Fall, the 2013 legislative session will be an opportunity for legislators like McCoy and Gronstal to put communities before corporations and people before profits – by passing a strong rate cap bill that cracks down on predatory payday lenders. It’s the right thing to do, and it makes a lot of sense. 

Learn more:

• Read more about Iowa CCI ACTION's work on payday lending at the Iowa Statehouse here.
• Read more about Iowa CCI's local organizing on payday lending here.

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