Many payday lenders in Iowa issue small-dollar, short-term loans that evade the state's usury laws and charge annualized interest rates as high as 400 percent. State legislators have repeatedly failed to place stricter regulations on the industry, although the idea has support from the Iowa attorney general’s office.
Since 2001, Sen. Joe Bolkcom (D-Iowa City) has introduced multiple bills to increase regulation of the industry. They include interest-rate caps, lowered fees, and a requirement that lenders provide repeat borrowers with information on debt management. The proposals have failed to gain traction, and a similar bill in the House mandating an option to pay off loans in installments languished after being introduced last year.
Lenders in Iowa, where there were 209 payday loan storefronts operating at the end of 2012, can charge a fee of up to $15 for a $100 loan. Although this could be billed as an interest rate of 15 percent, the annualized percentage rate is 390 percent. Payday loan advocates have opposed new regulations, contributing money to political campaigns and hiring lobbyists. Campaign contributions to state legislators from donors associated with the industry totaled more than $480,000 between 2003 and 2013, according to data collected by IowaWatch.
In response to the lack of state action, Iowa municipalities have taken action on their own. Nine Iowa cities in the past four years have passed ordinances that restrict locations for new payday stores. Although the cities cannot control interest rates, some say it is an important step toward keeping new lenders out of residential areas.