Two New York bills would rein in payday lenders.
The Stop Taking Our Pay Act would ensure loans from such lenders abide by the state’s 25% interest rate cap but since the companies do not specifically call them loans, they have been bypassing current state laws. Data show payday loans routinely have 200% to 400% interest.
Katy Lasell, statewide campaigns coordinator for the New Economy Project, said reports found the apps trap people in a predatory debt cycle.
“On average, borrowers double their borrowing frequency within the first year, rising from two to four loans per month,” Lasell reported. “Also, simultaneous borrowing across multiple apps increases over time.”
The STOP Act has been positively received by residents and state lawmakers. Polls showed 88% of New Yorkers support crackdowns on the apps. The industry is working on its own state and federal agenda to legalize the loans, while New York Attorney General Letitia James is suing payday loan leaders Daily Pay and MoneyLion for pushing loans onto unsuspecting New Yorkers.
Another bill helping to end loopholes for predatory lenders is the End Loan Sharking Act, which would extend the state interest rate cap to anything considered a loan. The use of payday loans has grown in recent years, though their popularity exploded in times of crisis, particularly during the economic instability brought on by the COVID-19 pandemic.
Lasell argued it is problematic people must use short-term debt to make it through the week.
“People need a living wage, and they need to be paid on time,” Lasell stressed. “But in the absence of that, no one needs products that are only going to deepen and worsen financial precarity. There’s just nothing essential about a product that traps anyone in our communities in debt and drains wealth from our communities.”
Studies estimated payday loans have taken more than $500 million from New Yorkers’ paychecks since 2019. Other reports showed bank overdraft fees rose an average of 56% after a person used one of the loans.
Edwin is a reporter and producer in North Tonawanda, New York. He’s previously reported for the Niagara Gazette and the Ithaca Times. Edwin got an early start in radio interning for WBFO-88.7FM, NPR’s Buffalo affiliate. In 2018, he graduated from SUNY Buffalo State College with a B.A. in Journalism, and in 2022, graduated from Syracuse University with an M.S. in Communications.