Percy Mayfield gave up his small business and moved back to Topeka in 2016 to be closer to family after a divorce.
He began working for a car dealership, and because of his fluctuating income, he eventually had to take out payday loans to support himself and his two children.
“One rolled into another. I tried to find a job that would help me be able to keep up, help straighten out my finances, but I wasn’t able to find the right job,” Mayfield said. “One might ask, you know, why did I keep doing it? I just didn’t know what else to do to try to pay my bills.”
Mayfield shared his personal experience Monday with the House Financial Institutions and Pensions Committee. His testimony was on behalf of the Kansans for Payday Loans Reform Coalition, a group lobbying for limits on “predatory” lending.
Rep. Jim Kelly, an Independence Republican who chairs the House committee, said he wasn’t interested in pushing payday reform legislation during the 2020 session. He said the House hearing was intended simply to better inform committee members on the issue.
An attorney for the industry urged the House committee to be wary of proposals overhauling payday lending laws in Kansas.
The state currently regulates payday loans under the Uniform Consumer Credit Code. Individual payday loans in Kansas can't exceed $500. Finance charges are capped at 15% with an additional 3% each month once a loan hits maturity.
States such as Colorado established “sensible limits” on payday loans, said Gabriel Kravitz, of the Pew Charitable Trusts. Colorado law allows borrowers to repay loans in installments and imposes limits on finance charges. The state also has the ability to void loans issued by unlicensed firms.
“It’s important to know that evidence shows that it’s possible to bring down prices quite significantly while maintaining access,” Kravitz said.
Those regulatory restrictions triggered closure of payday loan outlets in Colorado and other states, said Tom Witherspoon, an attorney with payday lender QC Holdings. He said greater state regulation of payday lending would increase consumer borrowing from unlicensed businesses.
“There’s a very big distinction you have to draw between licensed lending and unlicensed lending, and what happens with the law is it falls on the licensed lenders, the compliant lenders. It doesn’t fall on the unlicensed lenders because they don’t follow the law,” Witherspoon said. “So, what we really need is more enforcement on noncompliant illegal lenders.”