Voting Against Trapped Borrowers
One of the hardest obstacles to overcome is debt. Especially debt that is provoked by payday lending. Payday lenders give consumers the power to put themselves in debt. At the end of the day, it is up to the consumer to take out the loan and pay it back. Some payday lenders do not disclose all of the fees so when it comes time to repay the loan, the loan amount is an exorbitant amount. In Montana, there is more pressure on payday lending than ever with the Initiative 164.
The I 164 will place a 36 percent cap on all payday loans. This cap has been put into place in 17 other states already with many of the payday lenders in those states being forced out of business by this capping rate. However, without this rate, when the interest rates are turned into APRs or Annual Percentage Rates, the interest can amount to over 400 percent. Montana already has one law that caps the interest rate for Military personnel and their family, but these capping rights have failed when tried to be passed universally for all consumers who take out a payday loan.
About 80 percent of people in the payday industry are trapped borrowers who cannot afford to pay back their original loan so they end up having to rollover loans or take out entirely new loans to get through the pay period and take care of all of their regular expenses. By capping the loan, these trapped borrowers will finally be able to escape.
Currently in Montana, payday lenders make about $15 per every $100 that is loaned out. With overdraft fees, the amount that is made totals up to around $29. The APR for this amount is 755 percent. With the I 164 in place, payday lenders will only make about $1.38 per $100 loan which will eventually force payday lenders out of business.
Payday loans companies are fighting hard against this initiative. They also ask the question if no one is willing to help out low income consumers or people with poor credit, where will they turn to if payday lending no longer stands as a viable option?
