Payday Loan Times

A judge urged a state Senate panel on Thursday to support legislation to end abuses by some Nevada payday loan companies charging interest rates that are “flat-out unconscionable.”

Felix Salcedo, a retired Reno justice of the peace who’s now a senior judge, added in comments to the Commerce and Labor Committee that he has seen cases of interest rates as high as 7,300 percent.

Salcedo said forms provided by the instant payday loan companies disclose the consequences of late or no payments by borrowers, “but when you’re desperate and need a couple of dollars it makes no difference what’s on that form.”

In pressing for approval of AB478, Salcedo said cases involving payday lenders have clogged courts. He said in most cases borrowers don’t show up to tell their side of the story, and lenders can get default judgments unless a judge spots an egregious case and tosses it.

Assembly Speaker Barbara Buckley, D-Las Vegas, said her AB478 would stop the abuses by closing a fast payday advance loophole in a 2005 law. Buckley describes the effect of the practices as creating “an endless cycle of debt” for borrowers.

Buckley also says almost 40 percent of civil cases in Reno’s justice courts and 34 percent of such cases in Las Vegas’ justice courts are brought by payday lenders.

Also urging approval of the bill was Capt. Scott Ryder, commanding officer of the Fallon Naval Air Station. Ryder said that a dozen payday loan store branches are clustered within a short drive of his base, and that unfair lending can ruin the lives of sailors and soldiers and hurt the country’s military readiness.

Representatives of bad credit cash loan companies identified as making use of the 2005 loophole have denied they’re evading the law. They’re expected to testify before Senate Commerce and Labor at a follow-up hearing next week.

Other companies have endorsed the bill. Buckley said that while some payday loan locations are evading the law, about 500 are obeying it.

A 2005 law change banned abusive collection practices and limited the interest rates and fees charged by payday loans companies. Lenders can charge any rate for an initial period, but if a customer can’t pay it back, the rate must drop.

That law only applied to faxless payday advance lenders that issue short-term loans, defined as one year or less. But some companies simply stretched out the terms of their loans to last more than a year, Buckley said, adding that her bill would limit fees and terms on any loan that charges more than 40 percent interest