Payday Lift Off Providing Protection To Consumers Utilizing

The payday lift of Legislature first began its review of payday lenders during its 1991 Session

. Then Consumer Credit Commissioner of Neil Aerosmith requested legislation citing a concern that check cashing for a fee had become a prevalent practice in Kansas and was being conducted in a manner that would be considered a violation of the Uniform Consumer Credit Code (UCCC). The unregulated entities were advancing money and agreeing to hold a post-dated check for a specified, short period of time, and were collecting charges exceeding those allowed under the UCCC. The Commissioner indicated to the Senate Committee on Financial Institutions and Insurance that as it appeared there was a need for this type of service, there existed a need to regulate the activity in a manner that allowed the activity to take place lawfully while at the same time providing protection to consumers utilizing the check cashing service. At that time, the Kansas Attorney General had concurred that such practice violated the UCCC and, consequently, had taken action to enforce the law against the payday lenders. The financial records of seven companies were subpoenaed and examined, and all but one of those companies closed their businesses in UK.

1991 SB 363 addressed the concern about excessive interest charges and fees, and the Attorney General supported its passage. In some instances, the annual percentage rate (APR) on these short-term loans ranged from 600 percent to 1600 percent. Despite these rates, neither the Commissioner nor the Attorney Generals Office had received many complaints. When the companies closed, the Attorney General received a number of telephone calls from consumers asking when those companies would reopen. Although the bill was recommended favorable for passage by the Senate Committee, it was defeated on final action by a vote of 6 years and 32 nays. The Senate later reconsidered its action and sent the bill back to Committee for possible action at a later date.

Review of payday loan regulation continued for a second year. During the 1992 Session, the Senate Committee further considered SB 363 and the House Committee on Commercial and Financial Institutions reviewed HB 2749. The House Committee recommended its bill favorable for passage. On final action (initial vote had been 80 to 35), however, a member reported in his vote explanation that passage of such legislation would burden poor consumers as it would raise the interest rate tenfold from 36 percent to 360 percent. Fifty members changed their votes and the legislation was killed. When the Senate returned to its consideration of payday loan regulation, the Consumer Credit Commissioner (then William Catton) explained the House action on HB 2749 and rebutted the conclusion that the bill raised interest rates. The Senate Committee received favorable testimony from both the Attorney Generals Office and the payday loan industry and voted to amend SB 363 by inserting the provisions of HB 2749. SB 363, as amended, passed the Senate 40 - 0 and was referred to the House Committee which recommended it favorable for passage after considerable discussion. Ultimately, the bill died at the end of the Session.

by: PattrickHustain

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