The Iowa Catholic Conference has urged the state legislature to limit the interest rate on payday loans to 36 percent, saying the change should be a priority during the upcoming legislative session.
“The stated purpose of payday loans is to offer a solution to families who face a short-term crisis,” the Conference said in a press release. “But only one percent of these loans are made to one-time borrowers. On the average, Iowans who take out one payday loan end up with 12 loans.”
The Iowa Catholic Conference said these loans create economic dependency and high long-term consumer debt, with interest rates approaching or exceeding 400 percent.
"We believe these types of interest rates are unjust and should be outlawed," says Tom Chapman, executive director of the Iowa Catholic Conference. "Instead of promoting the financial stability of consumers, the system actually benefits more from their failure than their success. Public policy should protect the public from outrageous practices."
The U.S. Congress in 2007 passed a law to limit payday loans’ interest rate at 36 percent for military personnel. Fifteen states and the District of Columbia have capped interest rates or have prohibited payday loans.