June 3,, 2016
SUZANNE POTTER
PUBLIC NEWS SERVICE
Nevada consumer advocates are praising a federal plan released Thursday to rein in short-term lenders who can charge sky-high interest rates for payday and car-title loans.
Nevada consumer advocates are praising a federal plan released Thursday to rein in short-term lenders who can charge sky-high interest rates for payday and car-title loans.
The Consumer Financial Protection Bureau wants to limit the number of times a loan can be extended and require lenders to make sure borrowers can afford to pay the money back while still covering living expenses.
Nevada fast-food worker Harold Carnes said he got sucked into a cycle of debt when he took out a series of small loans to pay the rent after his work hours were cut.
"The fact that I couldn't pay back the loan due to the interest rate being so high, I was forced to take a second one out -- and then forced to take a third one out, to cover taking out the second loan," he said. "So, it's a trap. It got crazy."
A recent survey showed that one in five Nevadans has taken out a payday loan. National statistics show four out of five single-payment payday loans are renewed within a month rather than being paid off, and one in five car-title borrowers ends up losing the vehicle.
Sophia Medina, a staff attorney with the Consumer Rights Project at the Legal Aid Center of Southern Nevada, said the Silver State doesn't cap interest rates on these types of loans. So, lenders are allowed to charge what she terms "outrageous" rates -- and desperate, low-income borrowers get stuck on a treadmill of debt.
"We don't have a usury law here in Nevada," she said, "and so, the interest rates on the payday or title loans can be anywhere from 30 percent to 1,000 percent."
The head of the payday-lending industry trade group called the proposed rules "a staggering blow to consumers that will cut off access to credit for low-income Americans."
