Payday loan organizations are common in Nebraska. The companies charge extremely high interest rates and operate with few restrictions. However, a new bill in the Nebraska legislature seeks to cap interest rates at 36 percent. It also requires lenders to offer more affordable payments. Bill co-sponsor Democratic Senator Tony Vargus of Omaha says payday loans with interest rates that can top 400 percent often leave people having to borrow more money.
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"That cycle of 'a loan to pay a loan' is extremely typical in these instances, and that creates a cycle of debt," he explained. "And we have one instance where a $500 loan turned into over eight years at a $10,000 amount of money they had to pay back."
Non-partisan co-sponsor Senator Lou Linehan from Elkorn says the legislation will allow payday lenders to make a profit, but it also levels the playing field.
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"It makes no sense that we have our banks regulated and then, we have the payday lending people, who are under no regulations," she said. "They can still make money, and they should, if they're in business, but we don't want to get the people who need to use them for credit never to be able to get out of the hole."
A broad coalition in Nebraska has been trying for years to find a way to regulate payday lending.
