Editorial, 10/25: Payday loan interest cap long overdue for Nebraska | Editorial


Recall that financial difficulties forced a Lincoln credit union, based on granting loans to low-income residents, to merge less than two years after its opening. There isn’t much else to meet the immediate need.

But bad apples that resort to predatory practices have given the entire industry a negative reputation. The trick is to find language that walks a tightrope between helping Nebraskans in need and preventing an ever-growing debt trap from capturing those same people.

Nebraska law limits the term of these loans – which for the most part lack the traditional underwriting process and regulations imposed on standard bank loans – to a maximum of 34 days. Those who are unable to pay the balance in full often find themselves with the lender within a few weeks, requesting another loan.

It’s not hard to see how this vicious cycle can trap those who can least afford it. And, with the rise of smartphone apps that offer similar services with even less guarantees, the protections desired by supporters of the poll initiative are certainly needed.

Colorado and South Dakota are among eight states with the 36% statutory cap sought by organizers of the Nebraska petition campaign. Their different approaches, however, produced very different results.

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