Stop payday loans

Two Kansas City businessmen and a lawyer who became very rich very quickly by tricking low-income consumers with sky-high fees and interest rates on online payday loans now face criminal charges, according to a recent report in The Kansas City Star newspaper.

The Tucker Payday Lending Organization was an organized criminal group with leadership based in Overland Park and that operated throughout the United States, according to a federal indictment.

The $2 billion business started as early as 1997, authorities said, and preyed on more than 4.5 million people under a multitude of different business names. The federal indictments detail huge enterprises that for years got away with making loans to people in desperate circumstances, then claiming much more than the value of the loans in interest and fees.

The Kansas City three - Scott Tucker, Richard Moseley and lawyer Timothy Muir -  are accused of violating federal racketeering laws as well as the U.S. Truth In Lending Act and also breaking usury laws in multiple states.

The indictment came out of the state of New York that has a criminal law setting a lending limit at 25 percent annual interest rate. With that stringent cap, authorities had no difficulty establishing that the online payday loan operators were violating consumer protections.

The Star reported that enforcement is more difficult in Kansas and especially Missouri, where the average annual interest rates on payday loans is an outrageous 455 percent.

The collapse of Kansas City’s payday loan empire under the squeeze of federal enforcement is an ongoing story in KC and should serve as a cautionary tale in Kansas.

To be clear, the payday loan operations written about here have nothing in common with our trusted, regulated, commercial hometown banks.

Payday loan entities are not regulated by the Federal Deposit Insurance Corporation. They are just fronts for people preying on other people down on their luck.  

The Kansas Silver Haired Legislature - for the second straight year - is recommending to the Kansas State Legislature that the state stop all payday loan practices.

Payday loan sharks operate at both brick and mortar buildings and online from in the state and all across the country, and their tactics effect not only senior citizens but Kansas borrowers of all ages.

The Silver Haired Legislature is made up of 125 representatives all over 60 years old. The group makes recommendations to the Legislature and to the Governor on issues facing senior citizens.

In 2014, the Silver Haired Legislature’s Committee on Public Affairs suggested the following changes to payday loan laws in the state:

*One change sought in Kansas would prohibit a payday loan lender from having more than one loan outstanding at a time. Under current law, the lender can have two.

*Another change would prohibit a payday loan lender from making more than one loan to any one borrower within a 60 calendar day period. Under the current law, lenders are allowed to make three loans to a borrower during the specified time period.

*Another change would change the minimum term of any loan to no less than 60 days for any cash advance less than $500 and no less than 120 days for any cash advance of more than $500.

After recommending these changes, the Silver Haired Legislature’s Committee on Public Affairs went a step further and approved a resolution to end payday loans all together. The resolution was approved in 2014 by group’s Committee of the Whole. It read:

“Whereas payday loans carry a very low risk of loss, but lenders typically charge high fees causing borowers to pay more in interest than the amount of the loan they originally borrowed and,

“Whereas many payday loan customers are unable to repay their loan and are forced to get a loan “rollover’’ at additional cost and,

“Whereas payday lenders earn profits by making multiple loans to cash-strapped borrowers and,

“Whereas payday loan recipients are overwhelmingly low income taxpayers who can least afford to pay....the Kansas Legislature is hereby urged to enact legislation ending payday lending practices.’’

Of all the issues before the Legislature, this one should be a slam dunk for approval.