Together with a coalition of consumer groups, AARP Montana launched an initiative to limit the amount of annual interest on payday and title loans. At a kick-off event to announce the initiative, Bob Bartholomew, state director of AARP Montana, said many elderly and poor Montanans are struggling to make ends meet, especially during the recession.
"Payday lenders have taken advantage of their struggle, providing high-interest loans that are repaid out of the worker's next paycheck or the retiree's next Social Security check," Bartholomew said. "Reasonable short-term loans can be helpful for a worker trying to deal with an emergency, but these payday loans, charging more than 400 percent interest, frequently become a debt trap in which the borrower sinks deeper in debt."
The proposed initiative seeks to address a problem area of consumer financing that has been the subject of several attempts at the Montana Legislature that have failed. The groups joining in the campaign are calling their effort, “400% Interest is Too High; Cap the Rate.” The coalition represents a wide cross section of Montanans including seniors, women, religious groups, economic development organizations and unions.
“In this economy, anyone could need an emergency loan,” said Rebecca Mastee with Montana Catholic Conference. “Montana families struggling to make ends meet should not be charged over 400% interest. This is why the Montana Catholic Conference supports this initiative to cap the rate at 36%.”
Payday loans and car title loans have been under increasing scrutiny around the country and have been a concern for Montana groups for many years. These groups say these types of loans create a debt trap and cause an unsuspecting borrower to pay $800 for a short term loan of $300 with most of the profits going to firms owned by out-of-state companies.
“Over 70% of these predatory lenders are owned by out of state firms, said Tom Jacobson with Rural Dynamics. “In 2008, they made over $40 million in loans and collected over $9 million in interest and fees, draining millions of dollars from Montana’s local economy.”
According to 2008 filings with the Montana Department of Administration Division of Banking, 82 of the 116 payday loan establishments are owned by out of state firms. These national chains collected over $7 million of the over $9 million in interest and fees collected statewide in 2008.
“Predatory lenders were targeting military families, and the Department of Defense found that this was harming the combat readiness of our armed forces,” said Sheila Rice with NeighborWorks. “So, our military families are now protected by a cap that limits the interest rate to 36%. We believe that all Montana families deserve the same protection.”
To qualify the measure for the November 2010 ballot, backers need to obtain more than 24,000 signatures of registered Montana voters by June 18.
“When folks are out and about this spring and they see an opportunity to sign the petition, I would encourage them to so do,” said Bartholomew. “If enough people sign the petition, it will be on the ballot in November and then Montanans can decide whether 400 percent interest is too high and if it should be capped at 36 percent.”
400% Interest is Too High – Cap the Rate is supported by:
- AARP Montana
- Center for Responsible Lending
- Montana Catholic Council
- Montana Community Foundation
- Montana Women Vote
- NeighborWorks Montana
- Rural Dynamics
- SEIU Healthcare 775 NW
- Women’s Foundation of Montana