19 July 2022 | Tax and Budget

Payday Lending Practices Prey on Struggling Kansas Families

Emily Fetsch | July 19, 2022

The past several years have been difficult for many Kansans, particularly families with children. Low- and moderate-income families are more likely to experience food, housing, and job insecurity and are disproportionately more likely to be families of color. With rising inflation rates, the cost of living will continue to make it harder for families to afford the basics, potentially driving even more Kansans to find other immediate ways to provide for their families. 

Those struggling to feed, house, and provide necessities for their children are often forced to make the difficult decision to access a payday loan. This predatory practice allows lenders to loan out small amounts of money at exorbitant interest rates, with the expectation that the borrower pay off the loan with their next paycheck. But with a majority of Americans living paycheck to paycheck, these borrowers become subjected to the consequences of a highly unregulated industry, where fees and interest pile up, trapping them in a cycle of debt. Capping the allowable interest rates and fees (as many other states have done successfully) will protect children and families throughout the state.

Food, housing, and job insecurity shadowed too many families before COVID-19 and the related economic downturn, and they all worsened during the pandemic. 

According to the U.S. Census Bureau Household Pulse Survey, even with vaccines widely available and people able to return to employment, many Kansans are still struggling to meet their economic needs.  

  • 10 percent of Kansas families with children in the household have experienced a loss of employment income in the past four weeks.  
  • 13 percent of Kansas families with children in the household do not know if they can make their next rent or mortgage payment.  
  • More than one in 10 adults with children living in the household (12 percent) say their household sometimes or often did not have enough food to eat in the past week.  

Note: The most recent data is from April 27-May 9, 2022 and June 1-June 13, 2022. 

Current payday loan law in Kansas  

Under Kansas law, payday loans can only last 30 days or less and must be paid off in a single payment. Current statute prohibits “installment loans with more affordable payments … [making it] common for consumers to borrow and repay loans consecutively,” as “the typical borrower cannot afford such a large payment without becoming unable to meet other financial obligations.”

While a payday loan cannot last longer than 30 days, the average time in debt for a payday borrower is five months. As an example, “a borrower who takes out $300 today and is in debt for five months would repay a total of $750 ($450 in fees and $300 in principal).” 

In total, these excessive fees cost Kansans millions of dollars every year.

Currently, the typical APR (annual percentage rate) for a payday loan in Kansas is 391 percent. These high interest rates drain families’ resources and quickly place borrowers in a cycle of debt, not to mention lower the impact of lost personal income removed from the broader state economy.  

Our state should not allow an industry to prey on those in financial crisis. Economic stress hurts Kansas families, negatively affecting a family’s living situation and health. Legislative reforms can curb these urgent problems. 

What are other states doing? 

Thirteen states prohibit payday loans, while other states, including Colorado, Nebraska, Ohio, and Virginia, have recently reformed their laws. These states were able to bring down rates significantly while maintaining access to credit. In January 2021, Illinois imposed a rate cap of 36 percent, which has become the standard rate cap in the 18 states with such laws. Just three months earlier, Nebraska imposed that rate cap as well. 

In 2021, legislation proposed in Kansas sought to reform the payday loan industry, but not prohibit it. According to legislative testimony provided by The Pew Charitable Trusts, while the payday loan industry has claimed it won’t be able to continue with reform, “many of the same companies that operate in Kansas today also operate in states that have reformed their laws.” However, in Kansas, where the industry is still largely deregulated, these same companies “charge Kansas residents three times more” because Kansas law allows it. Despite high-cost lenders’ claims that payday regulations would cause them to be unable to offer credit to potential borrowers, their operations in regulated states show that individuals still have access to their services.

Payday lending reform is urgently needed for Kansas families 

Given the ongoing economic recovery from the pandemic and the rising costs of groceries, gas, and housing, it is more important than ever to help Kansas families avoid debt and economic insecurity by reforming the payday lending industry. Kansas legislators must prevent cycles of mounting debt caused by payday lending through the implementation of a cap on interest rates, fees, and loan amounts. Reforming the payday lending industry will bolster needed financial security for Kansas kids and the adults who care for them.  

To learn more about payday lending reform in Kansas, check out Kansans for Payday Lending Reform, a statewide network of dozens of faith, community, and labor organizations (including Kansas Action for Children) supporting reform of Kansas’ largely unregulated payday loan industry.  


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