Many Nebraskans are caught in the payday lender trap. They rely on these loans to pay an important bill but are forced to return week after week forcing people into a cycle of debt. Nick Bourke is an analyst with The Pew Charitable Trusts and says they are working with a number of organizations, including Nebraska Appleseed, to urge the Legislature to pass proven, common sense reforms to stop this practice.
Many Nebraskans are in need of a loan from time to time to pay for an emergency or unexpected expense. Statistics show that 7 out of 10 borrowers need the funds to pay rent, a utility bill or to make a car payment and have no credit to rely on. They turn to payday lenders that have a long history of making predatory loans. Bourke says these lenders have access to a borrower’s finances, like their checking account, and can withdraw the money the minute it is due. That leaves many hard working Nebraskans to go back for another loan and the cycle continues.
Nebraska allows payday lenders to charge more than 450% interest which is one of the highest rates in the country. To borrow $300 in Nebraska for two weeks would cost $53 but in Colorado it would cost $16.
Bourke says, “We know there is a better way to make credit available for people who want it. We know that if we stretched the loan out, so say a six month installment loan repayable in small increments, not taking one-third of their paycheck but only five-percent of their paycheck and a few other reasonable safeguards, like what other states have put into their reforms, the results are much better. People spend a lot less. People still have access to credit. That could put millions of dollars back into the community.”
Many community advocates and organizations in Nebraska have come together to urge the state Legislature to pass proven, common sense reforms to stop predatory lending abuses. Those include interest caps and fair repayment terms.