LINCOLN — Nebraska voters likely will decide in November whether to cap payday loan rates, according to the Secretary of State’s Office.
State election officials were still tallying verified petition signatures Thursday, but a spokeswoman said it appeared that initiative petition drive organizers “have the required numbers of signatures that they need.”
Nebraskans for Responsible Lending must have about 85,200 valid signatures to qualify their proposal for the general election. The group turned in more than 120,000 at the end of June.
The group’s proposal would cap payday loans at a 36% annual interest rate, the same limit already enacted in 16 states plus the District of Columbia. Congress also passed a 36% cap for active-duty military personnel after the Defense Department reported that payday lending was negatively affecting military readiness and the morale of troops.
Payday loans, also known as cash advances, check advances or delayed deposit loans, are a type of short-term, high-cost borrowing that people use to get small amounts of immediate cash.
Kent Rogert, a lobbyist for the Nebraska Financial Services Association, which represents the industry, said the group is exploring all of its legal options to fight the ballot measure.
“We’re serious about making a stand for our industry,” he said.
Earlier this week, Trina Thomas, the owner of Paycheck Advance, filed suit in Lancaster County District Court asking for a change in the language that would appear on the ballot.
In particular, she objected to including the term “payday lenders” in the ballot language, which was written by the Attorney General’s Office. Her complaint said the term is not part of the proposed law and “unfairly casts the measure in a light that would prejudice the vote in favor of the initiative.”
Critics say the loans at issue often entangle borrowers in a spiral of debt, in which they can’t meet the unaffordable terms and end up paying hundreds or thousands of dollars in fees over time. They fall further behind on bills and often lose bank accounts or even end up in bankruptcy.
Last year in Nebraska, payday lenders charged an average of 387% annual interest and took in nearly $29 million in fees and penalties, according to a report from the Nebraska Department of Banking and Finance. The average loan was $346.
Industry representatives say the proposed caps could kill their businesses and harm people who can’t get credit elsewhere. The state limits transactions to $500 each and people can have only two loans at a time.
The lenders typically charge a 15% fee, rather than traditional interest, for a short time period. For example, a customer could write a $100 check dated two weeks into the future and the lender would give that person $85 cash.
County election officials are still checking signatures on four other petitions — one that would legalize medical marijuana and a trio of petitions allowing casino gambling at horse racing tracks and directing tax revenues from such gambling toward property tax relief.
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