Group wants to put cap on payday loan interest rates
BATON ROUGE, LA (WAFB) - According to a new survey by the American Association of Retired Persons, Louisiana's population favors stronger consumer protection laws when it comes to payday loans. AARP is proposing a cap on interest rates charged by payday loan companies.
"I think right now it's an issue because you have a lot of organizations that realize the harmful effects that payday loans have on the population that they serve. We have a lot of pastors tell us that their church members that are caught in payday loan cycles. AARP says there is a lot of seniors that are caught in payday loan cycles. Even college professors tell us that there are students that are caught in payday loans, says David Greg of The Louisiana Budget Project.
"Two-thirds of people who take out payday loans wind up recycling that payday loan, which means they have to go back and take out a second loan to pay the first loan and a third loan to pay off the second loan," says Greg.
"Eventually a person in Louisiana who takes out a one hundred dollar loan will pay $270 in fees. They are highly prevalent in Louisiana. For every McDonalds you see on the corner, there's four payday lenders in that neighborhood. So they outnumber McDonalds four to one, so they're here and their goal is to try and trap people into long-term cycles of debt," he says.
AARP Director of Advocacy Andrew Muhl agrees something needs to be done. "There are several states that have banned the practice entirely. We're not looking at that were looking at simply providing a cap on interest rates," says Muhl.
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