Senator Targets Iowa Payday Loans
Inside Subprime: Feb 12, 2019
By Grace Austin
Recently, the Globe Gazette, an Iowa-based news publication, published an article written by Iowa Senator Joe Bolkcom criticizing the state’s payday loan laws. In the article, Bolkcom detailed changes that he views need to be made within the Iowa legislature to protect Iowans from predatory payday lending.
One of the major changes Bolkcom suggested was an interest-rate cap that would limit payday loan interest to a 36 percent APR, a change other states across the country have moved forward with. Bolkcom also pointed out that payday loan borrowers need to be provided with “new payment options” to get borrowers off of “the debt treadmill” that many who turn to payday loans find themselves on. Bolkcom also recommended that banks and credit unions provide more credit options to low-income borrowers in the state.
Bolkcom believes the payday lending industry purposefully targets low-income citizens, claiming lenders have “made millions” through predatory targeting practices, and intentionally aims to “rip-off” and exploit “low-income working and elderly Iowans.” Bolkcom urged readers to talk to their local state senators and representatives to express fears that working Americans are being exploited by lenders, and believes that vocal citizens are the only path to change as “no one cares about [the] issue” within the Iowa statehouse.
Last month, state Senator Nate Boulton wrote an article for the Des Moines Register highlighting the predatory practices of payday lenders in Iowa. Boulton called out payday lenders’ interest rates within the state, highlighting the 300 to 400 percent rates that payday lenders attach to the short-term loans. Boulton also called for an interest rate cap, and called out borrowers as targets by “schemes” that “end up being exploited”.
While Iowa does have some limits on how payday lenders can run businesses, they are minimal. Payday lenders in the state are limited to issuing one $500 loan at time, and are not permitted to charge fees that are more than $15 on the first $100 loaned. However, The Pew Charitable Trusts has labeled Iowa as one of 27 “permissive” states when compared to other states that have implemented stricter restrictions on payday lenders, such as interest rate caps. Back in 2016, it appeared that payday lenders in the state would be presented with more restrictions to curb predatory practices, but those changes never occurred.
Recently, Colorado passed legislation limiting payday loan interest rates to 36 percent, a bill that was overwhelmingly passed within the state in November of last year. It is estimated that Colorado-based payday loan borrowers will save $50 million a year in excess payday loan fees.
For more information on payday loans, scams, and cash advances and check out our city and state financial guides including Florida, Indiana, Illinois, Kansas, Kentucky, Missouri, Ohio, Texas and more.