Groups that back limits on the interest rates for so-called “payday” loans have formed a coalition, hoping to get Iowa legislators to pass a bill setting 36 percent as the top rate on such loans. Tom Chapman of the Iowa Catholic Conference says some payday loans have an interest rate of more than 400 percent.
“Nobody thinks this regulation is a bad idea,” Chapman says. “…And so the question should be raised: why can’t we get it done?” Naomi Wittstruck of the Iowa Annual Conference of the United Methodist Church says payday loans with triple-digit interest rates ruin lives.
“It is unethical, immoral, unbiblical and it should also be illegal,” Wittstruck says. “We are called to do something about the unconscionable practice.” Mike McCarthy of Iowa Citizens for Community Improvement says payday loan companies prey on those who can least afford to be “sucked dry.”
“It’s like the ‘wild west’ where anything goes and loans for 400 percent (interest) and higher are created,” McCarthy says. “Now these rates are immoral but legal and that does not make it right.” Victor Elias of the Iowa Child and Family Policy Center says a recent survey of Iowans indicates the vast majority of Iowans favor the proposed interest rate limit on payday loans.
“This is not a loan to get out of trouble,” Elias says. “It’s a debt trap that people can’t out of.” Groups like the Iowa League of Women Voters and Habitat for Humanity have joined the “Iowans for Payday Loan Reform.” Organizers expect a bill to be introduced in the state senate soon on the issue. Usury laws do not apply to loans of less than $500.