Advocates and experts recommend reforms to Kansas’ inadequate payday loan system



TOPEKA — A consumer credit expert recommends Kansas reform payday loans that could save consumers more than $25 million a year while maintaining access to credit.

These loans have been criticized in states across the country, with some even going so far as to ban them. The data suggests that while the majority of those accessing these loans are white, African Americans are disproportionately affected.

TiJuana Hardwell, a community organizer in Wichita, shared her personal experience of the predatory nature of the current lending structure with the Kansas Commission on Racial Equity and Justice’s subcommittee on the economy on Thursday. She recalled that her mother had been caught in a cycle of loans and repayments to support Hardwell and his six siblings after a divorce.

Every payday, after cashing her check at work, her mother would drive to pay off the loan, then immediately take out another loan to make sure they had enough money to live on. Sometimes she even took out loans from two lenders at once.

“When we’re talking about a system, it has to be dismantled,” Hardwell said. “It’s something that I willingly rally people around. I want to educate them. I also want to make sure these companies are accountable in how they offer these loans.”

A Kansas payday loan of $300 will often incur around $450 in fees for a total of $750, according to Pew Charitable Trusts. Long-term loans have grown in popularity in Kansas, but there’s no limit to what lenders can charge.

Gabe Kravitz, consumer credit expert for Pew Charitable Trusts, said lines of credit for small amounts can be beneficial if properly structured, but in Kansas, conventional payday loans do more harm than good. . He said the two-week loans offered by many lenders typically take a third of a borrower’s next paycheck and leave them in debt for an average of five months.

“Kansas payday loan slots today are about three times higher than in states that have updated laws and strongly protected consumers,” Kravitz said. “They did this by requiring affordable installment loan structures by driving down prices and ensuring that there were no unintended uses of state law or loopholes in the law. .”

Kravitz recommended Kansas go the way Colorado took. There, lawmakers and stakeholders reached common ground by effectively banning two-week installments and replacing them with a six-month installment loan with affordable payments.

Colorado saw loan costs drop 42%. Ohio and Virginia have since followed a similar path, and repayment costs have come down to 4% of the lender’s next paycheck.

John Nave, executive vice president of the AFL-CIO of Kansas, said his organization is interested in addressing the issue because it affects union members as well.

“Even though many of them are making a good living, they can also have financial problems in the payday loan business,” Nave said. “We have to push very hard this next session.”