Opinion | More restrictions on payday lending

The payday loan industry has flourished virtually unchecked in Kentucky for far too long, luring customers — often impoverished or desperate — with quick cash at a very high cost.

Now that's changing because of increased scrutiny from state and federal officials, The Courier-Journal's Jere Downs reported recently.

The state is getting more aggressive at enforcing existing laws that limit the amount people can borrow through the short-term, high-cost loans. And the new federal Consumer Financial Protection Bureau is stepping up enforcement of national payday chains, many of which operate in Kentucky, over unfair consumer practices.

But that's not enough in Kentucky where the payday industry is still allowed to charge exorbitant fees that amount to annual interest rates of 400 percent, a practice critics have called usurious and tantamount to "legalized loan-sharking."

Some states and Congress, seeking to protect military personnel, have capped the annual interest rate at 36 percent. But Kentucky lawmakers year after year have rejected such measures, citing supposed concern for the need of low-income people for quick cash.

More likely the concern was prompted by the cash the prosperous payday industry has poured into campaign coffers and into bank accounts of high-priced Frankfort lobbyists in past years.

But in 2015, the Kentucky General Assembly will get another chance to put some real teeth into state law by limiting the fees payday lenders charge.

A coalition of groups such as the Catholic Conference of Kentucky, Kentucky Youth Advocates and the Kentucky Council of Churches again will support a measure seeking to limit the fees payday lenders charge and enact more consumer protections, said Jason Hall, executive director of the Catholic conference.

State law currently limits a customer to no more than $500 in two loans over two weeks at a cost of $15 per $100 —or $75 for $500.

That means a consumer who takes out a $200 loan, usually over a two-week period, must pay $30 in fees. But too often, as Ms. Downs' article pointed out, the borrower comes up short and must take out new loans, in part to offset the costs of fees.

"I couldn't see any way out," said one laid-off worker who wound up paying $1,420 in fees over about two years.

Kentucky has made progress is catching lenders who exceed the maximum amount of loans per person allowed by state law, using an electronic tracking tool the state adopted in 2010.

Until 2010, the state had no way to track that, short of visiting individual payday loan stores and examining records. But using a new electronic database, the Kentucky Department of Financial Institutions this year has fined 68 payday lenders for violations, with the number increasing each year since 2010.

Lawmakers in 2009 approved the database that tracks payday loans but declined to take the next step, restricting fees. They claimed the state needed to give the database time to work.

It's working just fine.

Now lawmakers need to do their work and pass a payday loan bill that truly protects consumers.