Payday Loan Writer
A Senate committee Wednesday afternoon approved two bills to prevent payday cash advance and car title lenders from charging triple-digit interest rates.
The bills, already approved by the House, were sent for a vote on the Senate floor with minor amendments.
They expand a bill passed by the Legislature last year, though it does not go into effect until July 1. That bill limited payday lenders to charging a one-time fee of $10 per $100 loaned and no more than 36 percent annual interest on loans that are renewed or rolled-over. Payday cash loan lenders are limited to two rollovers. Oregon’s 360 payday lending stores make loans averaging about $300 for two weeks and charge an average 528 percent annual interest.
One of the bills passed by the Senate Commerce Committee, House Bill 2204, would extend the 36 percent cap approved last year to car title lenders, which use a car title rather than an upcoming paycheck as collateral in making small, short-term loans. Car title lenders also charge triple-digit interest rates.
A second bill approved Wednesday, House Bill 2203, would make out-of-state online payday loan and car title lenders subject to the 36 percent cap for loans made in Oregon. It also gives the state authority to create an electronic tracking system that would enable lenders to see if a person seeking money had loans outstanding with other lenders.
Everyone on the five-member committee, chaired by Sen. Floyd Prozanski, D-Eugene, supported the two bills except for Sen. Roger Beyer, R-Molalla, who said the bills restrict consumer choice.
The committee approved an amendment to the car title bill at the request of Rep. Tina Kotek, D-Portland, to prevent car title lenders from circumventing the 36 percent limit through sell-lease deals. Through such agreements, car title lenders buy a car from a borrower, who then leases the car and makes monthly payments to buy it back. The amendment puts such leasing agreements under the 36 percent cap that applies to cash loans, as well.
Bill supporters say the restrictions are necessary to prevent payday and car title lenders from taking advantage of vulnerable and desperate low-income Oregonians. Borrowers often roll over their personal loans repeatedly, paying high interest each time.
Lenders typically charge a total $240 for a $300 loan after three roll overs. Desperate borrowers also sometimes turn to a second lender to pay the first, and a third to pay the second, in a downward spiral of debt.
Payday and car title lenders say the regulations will put them out of business. Most borrowers like their services, they say, and those with poor credit will have nowhere to turn for money if the check cash advance lenders are forced to leave.
The new regulations apply only to lenders using short-term licenses. About 200 payday advance loan and car title stores have applied in the last year for conventional consumer lending licenses, which have no interest rate cap.
A third bill, House Bill 2205, that the committee will consider next week would attempt to plug that loophole by making the conventional license impractical for short-term lenders. The bill would require 90 percent of the loans made under a conventional license to be for at least six months. It also requires lenders to hire qualified underwriters and bans them from holding a car title or requiring the borrower to write a check post-dated for his or her next payday.
The committee next week also will consider a bill that would put a 36 percent cap on all consumer loans under $50,000.