Payday lending 'quicksand' for borrowers, advocates say

Payday lenders suck Kentuckians into a cycle of debt that can be nearly impossible to break, consumer advocates testified at a public hearing Wednesday in Lexington on deferred-deposit loans.

"I constantly see the effects of the debt trap of payday loans," said Bill Embry, a longtime Lexington merchant who also founded St. James Place to provide affordable low-income housing.

Embry said people often tell him they were able to get by until a crisis led them to seek a quick, short-term loan.

But high fees — usually $15 for every $100 borrowed — mean that when the loan must be repaid in two weeks, they come up short and have to borrow again and again.

"It's like quicksand, and as long as they have 400 percent interest rates, they can't get out," Embry said.

The Rev. Joseph Owens, pastor of Shiloh Baptist Church, said the rate amounts to usury, which he called "ungodly. It's unjust. It's a form of oppression, of enslavement."

Embry, Owens and others read to the Kentucky Consumers' Advisory Council testimonials from borrowers who took out new loans every few weeks, sometimes for years, paying thousands of dollars in fees on a few hundred dollars in quick cash.

The advocates said the only thing that works to prevent the debt from accumulating is a cap on interest, something they are pushing for again in the next legislative session.

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