Legislature and Governor Encouraged to Cap Payday Loan Interest Rates

By: Admin - Tuesday, January 05, 2010

The Iowa Catholic Conference strongly urges the legislature to limit the interest rate on payday loans to 36 percent. The Conference calls upon legislative leadership and the Governor to make this a priority issue during the upcoming session.

The stated purpose of payday loans is to offer a solution to families who face a short-term crisis. But only one percent of these loans are made to one-time borrowers. On the average, Iowans who take out one payday loan end up with 12 loans. This creates an economic dependency and high long-term debt for consumers. Interest rates can approach or exceed 400 percent.

"We believe these types of interest rates are unjust and should be outlawed," says Tom Chapman, executive director of the Iowa Catholic Conference. "Instead of promoting the financial stability of consumers, the system actually benefits more from their failure than their success. Public policy should protect the public from outrageous practices." 

In 2007, Congress passed a law which limited the interest rate for payday loans at 36 percent for military personnel. Fifteen states plus the District of Columbia have capped interest rates or actually prohibited payday loans. The people of Iowa deserve no less consumer protection.

The Iowa Catholic Conference is the public policy organization of the Catholic Church in Iowa. Its Board of Directors includes the bishops of Iowa and lay people, priests, a deacon and religious sisters. The diocesan bishops of Iowa are Dubuque Archbishop Jerome Hanus, OSB; Bishop R. Walker Nickless of Sioux City; Bishop Martin Amos of Davenport, and Bishop Richard Pates of Des Moines.

The Conference has a page on Facebook and can be followed at "Iacatholicconf" on Twitter.