LOUISVILLE, Ky.--- Payday lenders in Kentucky are coming under increasing restrictions because of a pair of laws passed by the state and federal governments at the start of the decade.
The Kentucky General Assembly in 2010 enacted a measure creating a database, "Veritec," to flag suspicious transactions. It records each loan via a Social Security number, driver's license number, address and other personal information.
Congress created the Consumer Financial Protection Bureau which began regulating payday lenders in 2011.
State banking agency commissioner Charles Vice told The Courier-Journal (cjky.it/1mSLtPP) that the rules have been a huge tool for regulators, who have seen the amount of fines collected increase in recent years. As of August, the Kentucky Department of Financial Institutions had issued 68 fines to payday lenders, compared to 70 for all of last year. There were 50 in 2012 and 40 in 2011.
"It's been a tremendous tool for us," Vice said. "That is why our fines are increasing."
He said the most common violation has been the falsification of personal information to extend credit beyond a borrower's limit. An outlet of ACE Cash Express at 2113 W. Broadway was fined $1,000 in April for such a violation, state records show.
Meanwhile, the number of Kentucky payday lenders has fallen in the last three years to 539 stores from 750. Kentucky's new law in 2010 also placed a 10-year moratorium on granting licenses for the lenders. Thus, as payday store licenses expire or are surrendered to the state, no new storefronts have opened, Vice said, contributing to the dwindling number of payday lenders.
"Not that long ago, payday lending was like the wild west. It was an unpoliced frontier," said Terry Brooks, executive director of Kentucky Youth Advocates, a nonprofit that has helped lobby for lower interest rates and other payday lending reform.
"The thing that we continue to be concerned with is that we know that a predatory climate in a high poverty state is a recipe for continued problems," he said.
Amy Cantu, a spokeswoman for the Community Financial Services Association of America, a trade group based in Alexandria, Virginia, said payday loans provide crucial credit to consumers struggling through the recession and the resulting tightened lending at banks.
"The 2008 recession ... changed the credit marketplace," Cantu said. "Consumers lost the ability to use traditional forms of credit as home equity loans and credit cards were restricted."
Mary Love took out a payday loan after coming up $200 short on her rent after being laid off from her job at Presbyterian headquarters. The following payday, her bank account was charged $200, plus a $30 fee by the Outer Loop lender.
Love said that easy access to cash ultimately cost her $1,420 in fees - with what amounted to an annual interest rate of 391 percent - as she paid down credit card debt and expenses between 2003 and 2005.
"I couldn't see any way out," said Love, now 69, a retired minister and an activist against payday lenders. Because of the rolling fees, "I felt defeated. I was under enough stress without adding the stress of having to go and beg from my family."
Love took a second payday loan of $400 plus $60 in fees to pay down some credit-card debt. But the $60 fee set her behind on money to pay for food and utilities. As a result, she took out a third $400 note to pay off the first, and incurred another $60 fee.
She said she eventually found relief through the help of a nonprofit credit counseling service, where she learned to better manage her money. Since then, Love said she speaks out about the hazards of easy cash from payday lenders to help others.
"I want people to know that once you are caught up in this, it is just really difficult to get out," she said. "I've given up feeling bad about it."