Nebraska becomes latest state to cap payday loan interest rates

Voters in Nebraska overwhelmingly supported a voting initiative on Tuesday that caps payday loan rates at 36% statewide, even though federal legislation restricting these high-cost loans remains at a standstill.

About 83% of voters in Nebraska approved Measure 428, according to the Secretary of State for Nebraska, who provides election results. The ballot measure proposed to set an annual limit of 36% on the amount of interest on payday loans. With its passage, Nebraska is now one of 17 states, in addition to Washington, DC, to impose restrictions on interest rates and fees on payday loans, according to the ACLU.

“This is a huge victory for Nebraska consumers and the fight for economic and racial justice,” Ronald Newman, ACLU national policy director, said in a statement. “Predatory payday loans further compound racial inequalities in the economy – these lenders disproportionately target people of color, trapping them in a cycle of debt and preventing them from building wealth.”

Previously, the average interest rate on a payday loan in Nebraska was 404%, according to the Nebraskas for Responsible Lending Coalition, which made it possible to obtain the initiative on the ballot box.

Lenders who offer these small loans, which you can usually take out by going to a lender with just valid ID, proof of income, and a bank account, require borrowers to pay a “finance charge”. service and interest) to get the loan, the balance of which is due two weeks later, usually on your next payday. Nebraska lenders could charge up to $ 15 for every $ 100 loaned, and individual borrowers can take out loans up to $ 500, according to the Consumer Federation of America.

Nebraska joins a handful of states that have voted in favor of payday loan limitations in recent years. South Dakota voters approved a 36% cap in 2016 and Colorado followed in 2018. Ohio imposes restrictions on loan rates, amounts and term which entered into force last year. New Hampshire enacted a 36% rate cap in 2009, and The Montana State Legislature passed similar legislation in 2010.

Beyond the tariff ceilings, Arizona, Arkansas, Connecticut, Georgia, Maryland, Massachusetts, New Jersey, New York, North Carolina, New Mexico, Pennsylvania, Vermont and West Virginia prohibit these types of loans and many include capping of interest rates on other types of consumer credit.

In the United States, 37 states have specific laws that allow certain types of payday loans, according to the National Conference of State Legislatures.

Federal lawmakers introduced similar legislation through the Fair Credit Act for Veterans and Consumers in November 2019, that would cap interest rates at 36% for all consumers nationwide. The bipartisan legislation – which is the latest attempt to curb payday lending at the federal level – was built from the framework of the Military Loans Act, 2006, which capped loans at 36% for active-duty members.

Despite Democratic and Republican co-sponsors, the bill remains stalled, forcing state groups like the Nebraska Coalition to push local campaigns forward.

Advocates hope the victory in Nebraska will prompt lawmakers and voters across the country to take notice. “[This] vote proves that we can still find common ground on important issues, including economic and racial justice. Protecting our neighbors is not a red or blue value, it is an American value, ”explains Danielle Conrad, executive director of the ACLU of Nebraska.

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