AARP Calls for Passage of Bill Reining in Idaho's Predatory Payday Loan Practices

Legislation addressing Gem State's "abusive" payday loan practices by capping interest rates and fully disclosing terms and fees is stalled in Cmt.

BOISE, Idaho, Feb. 28, 2012 /PRNewswire-USNewswire/ -- The lackluster economy hasn't meant bad news for everyone.  In fact, business is booming for Idaho's payday lenders, who are allowed to offer some of the largest loans in the nation without limits on interest rates.

Idaho earned a "failing" grade from the Center for Responsible Lending due to its lack of consumer protections. The state also has been cited by the Consumer Federation for allowing "abusive" lending practices by payday lenders. 

But that could all change, if two Idaho legislators get their way – but their legislative attempt to do so is being blocked.  Sen. Lee Heider, R-Twin Falls, and Rep. Elaine Smith, D-Pocatello, are proposing House Bill 470 to help tackle the growing problem. The AARP-backed legislation would establish a 36 percent interest-rate cap on all payday loans in the state and require the lender to fully disclose the fees associated with the loans.  However, the bill is currently being held up in the House Business Committee, chaired by Rep. Max Black, R-Boise.  AARP is urging a hearing on the legislation and calling for its passage.   

"Older Idahoans, just like many families on fixed incomes who've fallen on tough times, are turning to payday lenders to pay the bills, often times unaware of the debt traps associated with some predatory loans," said Angela Cortez, Interim Idaho State Director.  "In many cases, payday loans leave people in worse financial shape. AARP commends the efforts of Sen. Heider and Rep. Smith for taking a stand to protect Idaho consumers from some unscrupulous payday lenders."

Idaho is one of the least regulated states in the nation when it comes to payday lending, providing one of the highest maximum amounts someone can borrower at $1,000, with no limits on terms, fees, costs or APR.   AARP strongly supports interest rate caps for payday loans to protect against unfair and deceptive practices. 

"These are short-term loans that create long-term problems and they've been allowed to flourish in Idaho due to little-to-no regulation, creating real problems for an increasing number of state residents," Cortez said. "This has got to change and this legislation is a step in the right direction."

Payday loans are typically aimed at low-income people, living paycheck to paycheck. They provide cash loans with triple digit interest rates, making them nearly impossible to pay back. Idaho has the 49th lowest income in the nation with an average Social Security beneficiary receiving a check for just over $1,000 a month, providing a ripe market for the industry.  In 1993, there were two payday lenders in Idaho. That number has now soared to nearly 240 today.  

In 2005, there were only 495,000 payday loans made in Idaho by 2007 there were over 1.35 million loans totaling over $389 million. The issue has been a particular problem with members of the military and their families.

AARP is Idaho's largest membership organization with more than 180,000 members.
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SOURCE AARP Idaho