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Why We Need to Lower Payday Loan Rates to Protect Nebraskan Families

Payday loans create a cycle of harmful debt.

Payday lenders prey on military veterans, seniors, communities of color, young people, and vulnerable Nebraskans, charging more than 400% interest (APR).

While payday loans are often marketed as a short-term fix, the terms are actually designed to trap borrowers in a cycle of loans that cause long-term debt. Unlike most loans, payday lenders do not verify that borrowers will be able to repay their loan on time, because they stand to make more profit when those borrowers must reborrow again and again. Payday loans are linked to a cascade of financial consequences, such as increased overdraft fees, delinquency on other bills, involuntary loss of bank accounts, and even bankruptcy.

Predatory payday lenders are a drain on Nebraska’s families and the state economy. Nearly 65% of payday loan storefronts in Nebraska are owned by out-of-state corporations. These huge corporations are lining their pockets by extracting millions from Nebraska families who can least afford it.

When the Department of Defense reported that payday loans were impacting military readiness, Congress protected active-duty military families by limiting payday loan rates to no more than 36% under the federal Military Lending Act. However, Nebraska veterans remain unprotected and are often targeted by these predatory 400%+ APR payday loans.

In states that have stopped predatory lending, the evidence shows that people receive better financial options. Currently, 16 states, including neighboring North Dakota and District of Columbia have reduced payday lending rates to no more than 36%, saving consumers billions of dollars annually in predatory fees.