Kentucky Payday Loan Laws and Legislation

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All the states have got certain regulations about the operation of payday lending businesses. Payday loans are notorious for their high interest rates and therefore are not broadly approved. In 2009 the Kentucky Legislature has passed a law concerning the operation of such lenders in order to protect the borrowers. According to the law (Stat. Ann. 286.9-010 et seq.) payday loans are considered legal in the state. However, the same law presupposes certain restrictions in regards to fees and finance charges as well as amounts allowed and terms. Moreover, only check cashers are taken into consideration - all the other forms of payday lending are illegal in the state.

One of the peculiarities of the Kentucky state law concerning payday lending is a statewide database introduced in May 2010. It allows the regulation authorities to keep track and easily monitor all the payday lending transaction and in case of necessity easily to find out the information about the amount of loan, and their number, terms and fees and so on. This measure must have been estimated rather negatively among lenders as all their transactions should be clear and there is no way to bypass the law.

The state law of Kentucky allows taking no more than two laws simultaneously every two weeks. $500 is a maximum amount of loan that a person can apply for a period of a fortnight. For every $100 borrowed charges should not exceed $15. Loans are allowed to be given at least for 14 and not more than for 60 days. Finance charge on $100 loan given for a period of two weeks cannot exceed $17.65. Consequently, APR on $100 loan given for a period of two weeks cannot exceed 459%. Rollovers are not allowed in the state and therefore all the loans are required to be repaid in time. There is no cooling-off period between loans - borrowers are eligible for new loans as long as the previous ones are repaid. In terms of collection the regulations are the following - for every defaulted loan only one non-sufficient funds fee can be charged; its amount is not specified. Any criminal actions against borrowers are considered in the state.

In the year 2010 there was an attempt to pass a new bill on payday loans. It was presupposed to introduce an interest cap for payday loans that would prohibit charging more than 36% of the total borrowed amount. This bill was discussed in the Kentucky House of Representatives in 2011 as well and it failed to pass in the House Banking and Insurance Committee. Provided that the legislation had passed, Kentucky would have joined 18 other states (DC including) that have already had the law in action. However, the votes were divided in the following way: 10-13, and at the moment no changes in the law in this respect so far.

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