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Midlands Voices: Nebraskans Should Exceed This Necessary Limit on Payroll Advance Loans | Columnists

But paycheck lenders operate differently. They secure their repayment by asking for legal access to their clients’ bank accounts, including the ability to transfer funds to themselves in full, charging sky-high fees, regardless of whether borrowers have the funds in their accounts or not – and whether whether or not borrowers can pay their rent or mortgage or buy groceries. This means that lenders actually have an incentive to lend to people who can’t afford them, trapping borrowers in an endless cycle of loan renewals as fees and interest pile up.

Payday lenders rely on this model. They earn three-quarters of their income from borrowers with more than 10 loans a year, because the borrower is unable to fully repay the initial loan quickly enough. It’s a pretty sleazy way of doing business: sending desperate families down until they’re often unable to get by and bankruptcy is the only option.

For too long, we have watched as the annual interest rates charged by this industry have risen to the absurd average rate of 400%, which is more than 25 times what we pay for credit cards with the highest interest rate. Preying on vulnerable people – including military veterans, communities of color, and elders – is wrong, and it’s not the Nebraska way. Voter action this November is desperately needed.

Sixteen states already have such a limit, with neighboring states like Colorado and South Dakota taking action in recent years. Even active-duty soldiers are already protected by an act of Congress. It is now time for the nation to protect everyone else, including those essential workers who expose themselves to health risks every day to earn a living.

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