EDITORIAL: Payday lending

By NEMS Daily Journal

The Mississippi House’s passage on Tuesday of a bill that would slightly alter the interest limits charged by payday lenders in Mississippi was not what opponents of reauthorizing legislation sought, nor was it the hands-off inaction supported generally by payday lenders, a private-sector, entrepreneurial industry that employs an estimated 3,000 people statewide.
The House’s measure, passed 78-38, would extend the payback time for the payday loans, effectively lowering their interest rate calculated annually and placing a slightly lower maximum on the charge per $100 loaned – from $21.95 to $20 on loans of up to $200 paid off in two weeks. Loans from $300 to $500, which is the maximum payday loan, could carry a $21.95 charge per $100 paid off in 30 days.
Critics say the current limits allow an annualized rate of more than 500 percent, which some cite as usurious and even unethical because most of the people seeking the loans are poor, living from paycheck to paycheck.
It is noteworthy, however, that some of the supporters of extending the authorizing act generally are considered progressives who say not having payday lenders cuts off necessary credit for many Mississippians who can’t get it otherwise.
The maximum interest rate allowed for banks and regular loan companies is 36 percent APR.
Payday lending is a small, short-term, high-interest loan that is intended to bridge the borrower’s cash-flow gap between pay periods.
About 130,000 Mississippians use payday lenders and cash-for-title businesses, and nearly 1,000 payday lenders operate across the state. Lee County alone is home to 35 businesses that loan money short-term or cash checks for a fee, all regulated under the Check Cashers Act.
Similar debates about payday lenders, their rates and their impact on vulnerable people of limited means takes place in many other states, including the states in the South and in areas like the Midwest.
Some banking authorities believe the proliferation of payday lending poses a risk to the long-term financial viability of low- and moderate-income families whose assets and “wealth” disappear quickly in the payback structure of the industry.
Unless something unexpected happens the Mississippi Legislature appears likely to extend the Check Cashers Act, but no industry that makes its money on consumers should escape careful scrutiny and reforms in the face of excesses.
The non-profit groups and religious organizations supportive of reforming and in some ways limiting payday lending should remain vigilant and in the public debate.