***For Immediate Release***
April 18, 2018
Contact, Jeff Sheldon
Communications Director, Nebraska Appleseed
Mobile: (402) 840-7289
Nebraska organizations applaud passage of Predatory Lending Reform bill
Law will be small step forward to curb abusive lending, but future reforms are also needed
LINCOLN — Today Nebraska organizations applaud the Final Reading passage of payday lending reform bill LB 194, introduced by State Senator Tony Vargas (Omaha) and co-sponsored by Senator Lou Ann Linehan (Elkhorn). The bill passed by a unanimous vote of 49-0.
The Women’s Fund of Omaha, Nebraska Appleseed, and Voices for Children in Nebraska share the belief that LB 194 is a small step forward in the ongoing work to protect borrowers in Nebraska from the harmful impacts of payday lending which has a long history of skirting state law and trapping hard-working Nebraskans in a cycle of debt.
“For too long, hard-working Nebraskans have been victimized by predatory lenders when seeking short-term credit to cover an unexpected or emergency expense,” said Ken Smith, Nebraska Appleseed’s Economic Justice Program staff attorney. “We thank Senator Tony Vargas for his leadership and hard work to bring reforms to this area and work with a wide range of stakeholders to fix an unjust system that has hurt too many Nebraska families.”
Improvements contained in LB 194 will:
- Close a loophole that payday lenders in other states have utilized to evade regulatory limits on interest and fees.
- Include new reporting requirements that will allow the Department of Banking and Finance to more effectively track lending activity.
- Create a short payment plan borrowers can request once per year that would allow a little more time to pay back a loan.
However, these positive changes leave much room for future improvements to end some of the worst practices of predatory lenders. LB 194 does not address the core issues that make payday loans harmful to borrowers, namely the high cost and short duration of current loans. Our organizations will continue to seek reforms that will prevent payday lenders from continuing to charge exorbitant fees and costs to borrowers who cannot afford them.
“Predatory payday lending represents a real threat to women struggling to build economic security,” said Women’s Fund of Omaha Executive Director Michelle Zych. “Any gains made for women in equitable pay, homeownership and high-quality, affordable childcare are lost when a struggling family is thrown into financial turmoil by a cycle of debt created by payday lending. LB 194 is a step forward, but we will continue to work so that all women in Nebraska have access to affordable credit as a tool to build economic stability.”
“All Nebraskans should have fair credit terms and should not be taken advantage of when they need a loan,” Julia Tse, Policy Coordinator at Voices for Children in Nebraska, said. “While some states have ended the practice of payday lending entirely, we feel there is space for common-sense reforms that improve the loans for borrowers in a responsible and measured way that would have allowed lenders to continue to operate.”
The Payday Lending Problem in Nebraska
Current state law allows Nebraska payday lenders to charge an effective APR of 461 percent – one of the highest interest rates in the country – plus an uncapped amount of fees that often results in a borrower paying back the initial loan several times over.
In 2017, Nebraska Appleseed released a report showing that payday lenders had been found in noncompliance with state law at much higher rates than other lenders. Since 2006, the Nebraska Department of Banking and Commerce executed more than 300 separate enforcement actions against payday lenders for being out of compliance with state law, covering thousands of separate violations.
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