Lexington Herald Leader Editorial: Hold Beshear To His Promise.

Hold Beshear to his promise

Sometimes progress in Frankfort is so slow it's like watching paint dry: All but invisible to the naked eye.

We think — we hope — that kind of slow progress is what we witnessed when Gov. Steve Beshear promised to push for stronger consumer protections against the payday loan industry during next year's legislature.

We can't applaud with much confidence, though, because, even as he declared war on what amounts to modern-day loan sharks in bright, shiny offices, he also signed a bill protecting the sharks from their own kind.

An amendment to the bill Beshear signed will prohibit new payday lending companies from opening in Kentucky for 10 years. The moratorium was slipped in by Sen. Damon Thayer, R-Georgetown, who couldn't say who wanted it or why, only that "the industry" was behind it. (Ah, the mysteries when nine industry lobbyists are working their magic.)

Beshear cautioned that freezing market share for the existing lenders by excluding competitors is probably unconstitutional and could face a legal challenge.

But he signed the bill anyway because it also creates a database that will identify borrowers who have more than two loans at a time or more than $500 worth of loans. The law prohibits this, but without the database there's no way to enforce it.

The industry wanted the database and predicts that it will reduce loans by as much as 30 percent.

Advocates for consumers and low-income people say the database does nothing to protect consumers, who will still be able to dig themselves into insurmountable debt, and that the only real solution is limiting the interest that can be charged.

Lenders insist they can afford to make the one-time, high-risk loans only by charging high interest and fees. But many borrowers fall into a cycle of borrowing to cover the last loan and end up perpetually signing over a substantial chunk of their incomes with no hope of ever digging out and no alternative but bankruptcy.

Fifteen states, including Ohio, have limited the amount of interest payday lenders can charge. Congress capped it at 36 percent annually for military families.

Beshear says he will push for a 36 percent cap.

Such a cap ended payday lending in North Carolina.

So, why, if the governor is serious, bother with the database?

The state Department of Financial Affairs wants it, for one thing.

And in Ohio payday lenders found a loophole that has let them to stay in business despite a 28 percent cap approved by voters last year. So, the database may come in handy, even if Beshear gets something through the legislature.

There's also always a chance that even with the governor's backing, real progress will take more than one session.

All in all, though, if Beshear is serious about protecting Kentuckians from payday lenders, he would have made a more emphatic statement by vetoing this bill.