Idaho payday lenders lead nation in highest loan interest
SALT LAKE CITY (AP) - Idaho, Nevada and Utah have among the nation's highest interest rates for payday loans, according to a report.
The study, released this week by the Pew Charitable Trusts, found their rates are so high mainly because they're among only seven states that impose no legal limits on them.
Idaho payday lenders charge an average 582 percent annual interest on their loans to lead the nation, The Salt Lake Tribune reported.
That's followed by South Dakota and Wisconsin, both 574 percent; Nevada, 521 percent; Delaware, 517 percent; and Utah, 474 percent.
Among states with storefront payday lenders, the lowest average interest charged is Colorado at 129 percent, which matches its legal limit. The next lowest are Oregon at 156 percent and Maine at 217 percent.
Fifteen states either ban payday loans or cap interest rates at 36 percent. None of them has any storefront lenders.
Without a limit on interest rates, competition among lenders does not tend to lower rates much, according to the research.
Representatives of the Alexandria, Va.,-based Community Financial Services Association of America did not immediately respond to requests for comment Sunday.
The study also found the nation's four largest payday loan companies charge similar rates to each other within any given state, usually at the maximum allowed by law. States with higher limits have more stores, but the rates remain higher and competition does not lower them much.
"This new research shows that payday loan markets are not competitive," Nick Bourke, project director for Pew, told The Tribune
The study urges states to limit payments to "an affordable percentage of a borrower's periodic income," saying monthly payments above 5 percent of gross monthly income are unaffordable.
On average, a payday loan takes 36 percent of a person's pre-tax paycheck, Bourke said.
"Customers simply cannot afford to pay that back and still afford their other financial obligations," he said. "This is why you see people ending up borrowing the loans over and over again."
Information from: The Salt Lake Tribune