by Michael Lyle, Nevada Current
Borrowing $500 from a payday loan?
New research from Pew Charitable Trusts says Nevadans are charged an average of 602% and paying $924 for an installment short-term loan paid over the course of four months.
Only in Idaho do payday borrowers pay more, according to the research.
In 18 states and the District of Columbia, laws have been enacted that prohibit high-cost small loans outright or set low rate limits. Payday lenders do not operate in these jurisdictions.
Nevada has struggled to pass legislation to cap high percentage rates. In 2019, legislation proposing to limit interest rates at 36% failed to get a hearing.
That same year, lawmakers voted to create a statewide database to track short-term payday loans. Legislators said data collected could help better monitor or regulate the industry.
After receiving pushback from the industry and dealing with problems resulting from the pandemic, the database, which was supposed to be up and running July 2020, went operational in January.
The statewide regulation, approved by lawmakers included provisions to prevent customers from taking out multiple loans that exceed 25% of their income.
Four states – Colorado, Hawaii, Ohio and Virginia – have passed some reforms to short-term lending practices since 2010.
The average annual percentage rate in those states is between 114% in Colorado and 144% in Hawaii. Taking out a $500 short-term loan cost in those states costs range between $110 and $159 over four months.
In Idaho, which is similar to Nevada in having few safeguards for borrowing according to the research, average rates are 652% and could cost people $1,000 to take out an installment loan.
Pew recommended that “the 18 states without payday lending continue to prohibit high-cost loans and that other states either choose to follow those states’ lead or enact comprehensive reforms like those in Colorado, Hawaii, Ohio, and Virginia.”
“The experiences of those four states provide a clear blueprint for policymakers seeking to protect consumers and enable access to small-dollar credit,” the report notes. “And their approaches share four key ingredients: fair prices that are viable for lenders and borrowers, affordable payments, reasonable time to repay, and widespread access to safer credit.”
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