As members of Congress push for allowing payday lenders to access federal loans, data show that their business in Kentucky dropped precipitously when the pandemic struck.
The industry processed about 20% fewer loans in March than it did the previous March, according to a monthly report provided to the Kentucky Department of Financial Institutions by the loan processing firm Veritec Solutions. That represents a drop in lending of $8.3 million in the short-term, typically high-interest loans.
The database shows loan volume ranged from 129,000 in March 2019 to as high as 168,000 loans the following August. But only 104,000 loans were processed this March, the lowest by far in the last year.
More than 282,000 Kentuckians filed for unemployment insurance in March.
Payday, or deferred deposit, loan products offer small-dollar loans to borrowers, typically those with poor credit or without access to a traditional bank account. Data show the average payday loan in the last year in Kentucky was $348. Borrowers usually need to pay back the amount borrowed, plus interest and loan fees, within two weeks time.
Critics of the industry say the loans are designed to trap borrowers into a cycle of debt, and research from the Consumer …