DURHAM, N.C. – Nebraskans voted for Initiative 428 to stop triple-digit predatory lending by reducing annual interest rates from an average of over 400% to 36%. The initiative passed by an overwhelming majority of 83% of the vote. Nebraska joins Colorado (2018) and South Dakota (2016) in enacting this reform through a citizen’s initiative in recent years.
Payday loans carry an average of 400% interest rates and are designed to create a long-term cycle of debt. The average borrower ends up with 10 loans per year and payday lenders derive 75% of their fees from borrowers who end up with more than 10 loans per year, demonstrating that the long-term debt trap is the rule and not the exception. The debt trap is associated with a cascade of financial troubles, including an inability to meet basic living expenses, an accumulation of bank fees, closed bank accounts and bankruptcy.
Center for Responsible Lending Policy Counsel Kiran Sidhu made the following statement:
We are thrilled to see Nebraska join the 16 states plus D.C. that are addressing the payday lending debt trap with the most efficient and effective reform available, the 36% rate cap. The Vote for 428 campaign brought the passion of a diverse, bi-partisan coalition of 28 groups including former borrowers, credit counselors, housing advocates, civil rights groups, faith leaders, state legislators and many others to bear in a campaign characterized by courage and collaboration in the particularly trying time of the COVID-19 pandemic.
Triple-digit interest lending is predatory and makes financial difficulties worse for families who are struggling to get by, especially in the difficult times in which we find ourselves. Not only that, but payday lending was draining nearly $30 million per year from Nebraska’s economy, money that will now go toward living expenses and financially fair products that will help get things buzzing again.
We must come together now to protect these reforms for Nebraska and the other states that effectively enforce against debt trap lending. And we must pass federal reforms that will end this exploitation across the country and open up the market for healthy and responsible credit and resources that provide real benefits. This is especially important for communities of color, which are targeted by predatory lenders and are hardest hit by the pandemic and its economic fallout.
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