Statement of Kentucky Governor Steve Beshear on Payday Lending Reforms

March 25, 2009 -- FRANKFORT, Ky.—“House Bill 444 represents an important first step in regulating the practice of payday lending in the Commonwealth. The real-time database being created will provide enhanced monitoring capabilities, which should lead to a 25 to 30 percent reduction in the number of loans. It is important that we move forward now with this strong protective measure on behalf of consumers and others who may fall prey to predatory lending practices.

"I appreciate the work of Rep. Johnny Bell and others to strengthen the oversight of this industry. That said, I continue to have strong concerns about one measure in the legislation: a moratorium prohibiting payday lenders from moving into the marketplace for 10 years. First, it is unclear whether this measure would provide any protection to consumers. Second, I question the constitutionality of this provision and believe it may be subject to a legal challenge.

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However, I am not willing to sacrifice the important protective measure put in place by a database over a legally dubious moratorium that may not pass legal muster in any event. At the same time, I also believe we should begin preparing to implement further regulatory protections for consumers. That is why in the 2010 legislative session I will work with my colleagues in the House and Senate on capping the annual interest rate payday lenders can charge in a way that is consistent with the 36 percent cap that the federal government imposes on what can be charged to our military personnel. Today, we are taking a strong first step to protect consumers. In the future, I believe we must take the next step of imposing caps on these lenders to afford consumers even stronger protections.”

Source: Kentucky Governor