A Senate committee Wednesday approved legislation that would significantly cut the maximum interest rates payday loan operators can charge lenders.Payday loans are usually small loans with short-terms that usually range from 14 to 30 days. Maximum interest rates on a payday loan can currently go up to a maximum of 456 percent APR. Under current law, a person who takes out a loan of $500 would pay a total of $1,605 over six months on the loan, with interest, fees and principal added in. Most borrowers remain in debt for an average of six months, according to the Pew Charitable Trusts.Critics of the industry say that the loans keep the poor trapped in a cycle of debt. Advocates have for years pushed for an interest rate cap of 36 percent on payday loans.The industry says they provide a lending service to a community not usually served by traditional lenders, and that they make loans with high risks attached.The legislation, sponsored by Sen. Arthur Orr, R-Decatur, seeks a middle ground between the two camps. Modeled on a similar law passed in Colorado in 2010, the bill would set a minimum loan term of six months and effectively cap the interest rate… Read full this story
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