Payday Loan Times

Sawbucks closed two of its three Klamath Falls locations in anticipation of the new state regulations that cap interest rates for payday loans.

The stores closed the last week of June.

There was previously no cap for loans, said Melissa Johnson, Sawbucks manager. “We’ve tried to work with our customers that used to have those higher loans.”

She is concerned about the impact on personal cash loan customers, saying many have no other lending options because of their credit histories.

Interest rate cap
The new law caps the interest rate at 36 percent, but also allows an origination fee of $10 per $100 loaned, though no more than $30 for any instant payday loan amount. Previous annual interest rates reached 520 percent.

Some stores, like QuickCheck are still open and have made changes to comply with the new law. Rent-A-Centers in Oregon closed all their financial services departments. Other stores, such as the Check ‘N’ Go chain, have closed several quick cash advance locations in Oregon. All three had locations in Klamath Falls.

“It was a fatal blow that the Legislature gave us,” said John Rabenold, corporate spokesman for Check ‘N’ Go.

Eventually, all 21 Check ‘N’ Go locations in Oregon will be closed. Some remain open while customers’ accounts are settled.

Jobs lost
About 60 employees of Oregon’s Check ‘N’ Go will lose their faxless payday advance jobs with the closures.

It’s unfortunate that the Legislature did not take into consideration the effect the new law has on employees or offer an incentive for retraining, Rabenold said. Closing two Sawbucks stores in Klamath Falls required laying off two employees. Both had been with the company for four years.

Johnson said because Sawbucks offers other services such as check cashing, Western Union, money orders and utility payments, the final store will probably remain open. Streamlining expenses will help, she said.

Meanwhile, she is researching impacts of a check cashing law that limits excessive fees of $5 or varying percentages from 2 percent to 3.5 percent, depending on what type of check is being cashed.

The following is a paraphrased editorial from The Register-Guard in Oregon…

Dozens of fast payday loan and car title lenders have closed their doors across Oregon since a new state law capping their annual interest charges at 36 percent went into effect this month.

Boo hoo.

Well, not exactly. Few Oregonians are shedding any tears for an industry that claims it won’t stick around unless it can charge annual interest rates of 520 percent. Such rates were standard fare for providers of payday advance loans before the Legislature passed the much-needed usury cap earlier this year.

Theatrics are obviously involved here. An estimated 60 payday loan stores statewide have closed or surrendered their licenses since June 1. That leaves about 200 payday lenders still doing business under the new regulations. Because 29 other states have imposed interest rate caps similar to Oregon’s, it seems likely that the industry will adapt and continue to exist in this state, as it has elsewhere.

Some short-term, no fax cash advance lenders no doubt hope that the Legislature will reverse itself in the next session and allow them to resume charging the exorbitant interest rates that they used for a quarter century to prey on desperate and naive Oregonians.

They should think again. Oregonians are fed up with legalized loan sharking. The Legislature began regulating the industry last year after cities across the state began adopting their own ordinances, and a statewide coalition of religious groups and charities began preparing to put a statewide initiative measure on the ballot.

Not that anyone should expect the industry of bad credit payday loans to slink quietly into the night. In a special session last year, the Legislature clamped down on payday lenders. The industry quickly figured out how to sidestep the new regulations by offering new types of loans under different licenses.

That prompted the 2007 Legislature to impose a blanket interest rate limit on consumer loans of all types. Other than an outright ban on payday and car title loans, it’s the only proven way to keep predatory lenders from taking advantage of the poor and vulnerable.

Payday cash loan lenders continue to make the improbable argument that the new 36 percent cap and other new restrictions make it impossible for them to stay in business. That fails to explain how the industry has managed to survive in the other states that have adopted interest-rate caps similar to Oregon’s.

Short-term lenders also claim that the Legislature has left low-income borrowers with no way to obtain short-term loans. That’s simply untrue. A variety of lenders, in particular credit unions, offer short-term loans at lower rates and with fairer terms.

What the payday lenders really want is for Oregon to turn back the clock to 1981, when the state lifted all of its interest rate caps on personal loans. The move was intended to lift restraints on the consumer credit marketplace’s ability to self-regulate through competition, supply and demand. But the practical result was a seamy proliferation of short-term lenders who charged annual interest rates in excess of 500 percent.

Now, these short-term lenders have a simple choice: They can find a way to stay in business by offering consumers loans under the reasonable limits provided by the state’s new regulations. Or they can shutter their businesses and leave this state, muttering with every step about how unfairly they’ve been treated and how much they’ll be missed by cash-strapped Oregonians.

If they choose the latter, it’s doubtful anyone will shed any tears.

Scores of Oregon payday and car title lenders have closed their doors, as a 36 percent interest rate cap on regular and faxless payday loans and other new regulations took effect last week.

Gone are the 520 percent annual interest rates that were common among payday lenders before the Legislature recently passed new regulations. Gone, too, are many of the lenders. But among those who remain, borrowers will find their small, short-term loans cost about a third of what they cost before.

At least 60 no faxing payday loan stores have closed or surrendered their licenses since June 1, says Charles Donald, supervising examiner at the state Department of Consumer and Business Services.

Luanne Stoltz left a 20-year career as a high school math and science teacher years ago to open two payday stores in Portland. She has closed them both and says she doesn’t know what she will do next. “I’m out of business,” she said.

Check ‘n Go Inc., a payday advance loan lender based in Mason, Ohio, will close its 21 Oregon stores because of the new regulations, a spokesman said. Advance America, Cash Advance of Spartanburg, S.C., the nation’s largest payday loan company, is evaluating whether it can keep its 45 Oregon stores open, said Jamie Fulmer, director of investor relations for the company, which operates in 37 states.

“The economic situation that exists in Oregon currently is one that we think is prohibitive,” Fulmer said.

Northwestern Title Co., based near Atlanta, has stopped making car title loans in its 17 Oregon stores, which it is preparing to close, said Ken Wayco, president. Car title loans are similar to payday loans except they use car titles rather than the borrower’s next paycheck as collateral.

Northwestern recently filed a lawsuit in Marion County Circuit Court challenging the constitutionality of the new law that caps interest at 36 percent for all consumer loans.

“Unless we prevail in the suit there, we’re all out of business,” Wayco said.

Still, more than 200 personal cash loan lenders are doing business, at least for now, under the Legislature’s new regulations.

“It looks like some businesses are able to provide more affordable loans, and that sounds like a real win for the community and consumers,” said Patty Wentz, spokeswoman for Our Oregon, a nonprofit progressive coalition that led the fight for laws regulating payday and car title lenders.

The new laws allow pay day loan and car title lenders to charge an origination fee of $10 per $100 loaned, though no more than $30 for a loan of any amount. Loans must be for at least 31 days. Lenders can charge 36 percent annual interest, or about $3 per $100 in addition to the origination fee.

That means lenders can charge a total of $13 per $100, which amounts to an annual interest rate of about 154 percent for a 31-day loan.

Click here to read the rest of this article from The Oregonian…

The Oregon Senate Monday approved new limits and restrictions on high interest-rate lenders. The legislation was inspired by critics of payday loans who loan money for a short time at exhorbitant interest rates.

The bill passed Monday is the second half of a consumer lending protection package which is quickly moving toward final approval. It extends consumer protection laws to companies offering high-interest personal loans to Oregon consumers through the mail, the Internet, or over the telephone.

Passage of the bill follows Senate passage on Friday of a bill that limits the interest rate on title loans to 36% per year.

The new rules also create a database to track title and payday advance loans, and prohibits debt collection by a lender unless they have a state license. There are also limits on fees for dishonored checks.

The House of Representatives originated both bills, and already passed them.

However, because the Senate made some changes, they now go back to the house for reconciliation of the Senate and House versions. That reconciliation is considered likely to happen, and so is approval by Governor Ted Kulongoski, who has been a prime supporter of both fast cash loan ordinances.

Claiming they are protecting consumers, lawmakers in Nevada, New Mexico and Oregon recently have clamped down on the short-term, high-interest fast payday loan lending industry, blaming it for saddling residents with dangerous levels of debt.

The spate of new laws targets payday lenders and other creditors who offer customers short-term loans - meant to tide them over to the next payday - that can carry annual interest rates exceeding 400 percent. Critics say the lenders prey on low-income borrowers who end up trapped in a cycle of costly repayments.

Oregon Gov. Ted Kulongoski (D) on Tuesday (June 19) signed a series of bills that place new restrictions on the fees charged by providers of instant payday loans. Nevada Gov. Jim Gibbons (R) on June 1 signed off on a plan to close a loophole in state law that has allowed some short-term lenders to charge annual interest rates as high as 900 percent.

In New Mexico, Gov. Bill Richardson (D) in March also approved legislation to limit the terms of payday loans, but consumer groups complain the law doesn’t go far enough.

Heated statehouse debates over payday cash advance lending also have taken place in Georgia and Virginia this year, pitting consumer advocates against lenders, who argue that state restrictions ruin their businesses and deprive customers of services they need.

The subject has gained traction in state legislatures since Congress last year passed a law capping annual interest rates on payday loans at 36 percent for military service members and their spouses, who frequently resorted to the lenders, according to analysts.

According to a legal analysis by the Consumer Federation of America, 12 states effectively ban payday lending: Arkansas, Connecticut, Georgia, Maine, Maryland, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania, Vermont and West Virginia.

In response to growing legislative pressure, cash advance loan lenders in February kicked off a year-long, $10 million advertising campaign to defend against what they consider unfair criticism - and to tout a new set of “best practices” to reassure borrowers. Among other standards, the guidelines call on lenders to use truthful advertising techniques and “appropriate collection practices” to retrieve payments.

“The product is good, but some people aren’t using the product correctly,” said Steven Schlein, a spokesman with the Community Financial Services Association of America (CFSA), which represents payday lenders and is footing the bill for the nationwide ad campaign.

At the center of the debate over payday lending is the question of whether annual percentage rates, or APR, should apply to short-term personal loans. Lenders, for example, typically charge $15 for a two-week, $100 loan. Schlein said payday customers think of that fee as 15 percent interest - not the 390 percent it amounts to annually. But consumer groups reject that argument.

“That’s like saying you shouldn’t quote the price of gas at $3 a gallon just because you bought half a gallon,” said Jean Ann Fox, director of consumer affairs with the Consumer Federation of America. More importantly, federal law requires interest rates to be calculated annually, Fox said.

Oregon’s new restrictions are being hailed by consumer groups because they target not only cash advance lenders, but other short-term lenders as well, including check-cashing businesses and those providing loans for vehicle titles. One of the main provisions of the package requires an annual interest rate cap of 36 percent across a spectrum of consumer loans, which, in the case of a $100 two-week loan, would amount to about $1.38 in fees.

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Legislators say the new Oregon payday loan law will stop lenders from shattering the finances of it’s customers. But with cash stores closing down, some people have no where to turn for more money.

“I was going to use that money to pay for other bills, but now I’m stuck with no money,” said Rose Tubens, who receives payday loans.

Tubens borrowed $250 from her local payday lender and was going to borrow $500 more. Now the store is closing on July 2 and won’t give out anymore quick cash loans.

“It puts a big dent in our financial situation as to how to get through the month,” Tubens, who has to pay off the $250 plus interest by June 15, said.

Without an additional faxless payday advance, she doesn’t have enough money to pay her bills and the loan on her $1,000 disability income.

“It’s a never-ending cycle, I realize. But for some of us with low-incomes, that’s the only way we have to survive,” she added.

Tubens had to cut costs in other ways.

“It’s going to put me in a situation where my utilities are shut off until the bills are paid. You’d be surprised at how cheap you can eat,” Tubens said.

Tubens will have to get a smaller personal loan at a different lender, but it still won’t fix her financial situation. Her credit is shot and her unpaid loan will go to a collection agency.

“My credit is non-existant. If you don’t need money, you can borrow money. If you need it, you can’t,” Turbens said.

The Oregon resident says all she wants is a providers of bad credit payday loans that will provide reasonable rates for large loans, but it will be hard for her to get one because of her bad credit history.

The Oregon Senate approved the interest bill last week. It sets a cap of 36-percent for annual interest rates. The House already voted in favor of it and Governor Ted Kulongoski says he’ll sign it into law.

It takes effect July 1.

The Oregon State Senate officially voted this morning to crack down on out-of-state Internet payday loan lenders operating in Oregon by limiting the annual interest rate they charge to 36 percent.

House Bill 2203, which also regulates car title loans in Oregon, is part of a package of bills moving through the Legislature designed to eliminate the triple-digit APRs commonly charged by payday cash loan lenders in the state.

The Senate voted 20-10 in favor of the bill with no debate.

Sen. Brad Avakian, D-Bethany, a member of the Senate committee which sent the bill to the full Senate floor last week, briefly introduced the bill prior to the vote.

The House already passed it, but will vote again on minor amendments. The bill then goes to Gov. Ted Kulongoski, who has said he will sign it.

The bill regulates out-of-state payday advance and car title lenders making loans in Oregon through the Internet or by telephone or mail.

It requires that they charge an initiation fee of no more than $10 per $100 issued as a small payday cash loan and then no more than 36 percent on any extension or rollover of the loan.

The Legislature approved the same payday loan regulations on Oregon consumer lenders. They take effect July 1.

The measure approved Monday also gives the state Department of Consumer and Business Services authority to create an electronic tracking system so that payday advance and car title stores can check if an applicant for a cash advance owes money to other lenders.

Car title and payday loan 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 if lenders leave.

The 360 Oregon payday loan stores, on average, charge a 528 percent APR on payday loans, for about $300 for 2-3 weeks.

That means that with three rollovers, a borrower would pay $240 in interest for a $300 payday loan. Oregon payday advance providers made 841,000 payday loans, including rollovers, in 2005.

Consumer advocates, religious leaders, food bank operators, the AARP of Oregon and other critics say an interest rate cap is needed to prevent payday and car title lenders from preying on vulnerable and desperate low-income Oregonians.

Some borrowers, unable to repay faxless payday loans, turn to a second lender to pay the first, and a third to pay the second, and so forth, as they sink down into a downward spiral of debt.

A Senate committee approved two bills Wednesday afternoon that would block attempts by providers of payday loans and car title lenders to circumvent new caps on high interest rates.

The bills, already passed in the House, would tighten restrictions on conventional consumer loans and limit annual interest and fees on a consumer loan under $50,000 to 30 percent above the federal reserve discount rate, which is now 6.25 percent.

They now go to the Senate floor for a vote, with the Senate Commerce Committee’s recommendation of support, and then back to the House for a concurrence vote on amendments. Gov. Ted Kulongoski has said he will sign both fast payday advance bills if they pass.

Car title and payday lenders now charge triple-digit interest rates on small, short-term loans. Payday lenders on average charge 528 percent annual interest. Regulations passed last year by the Legislature and other bills now moving through the Senate would restrict payday and car title lenders to an initial fee of $10 per $100 of a small loan.

They could charge no more than 36 percent interest on renewals or rollovers of the faxless payday loan.

But those restrictions, which will take effect July 1, apply only to loans made under short-term licenses commonly used by car title and payday lenders. In the last 12 weeks, 138 of the state’s 360 payday lending stores have applied for a conventional consumer license, a different license that would allow them to operate outside the new regulations.

The two bills passed Wednesday by the Senate committee would close that loophole. House Bill 2205 makes the conventional license impractical for short-term personal cash loan lenders, as it requires 90 percent of their loans to be for at least six months. It would also require the lenders to use underwriters, undermining one of the appeals of payday and car title loans: no credit checks.

House Bill 2871, sponsored by House Speaker Jeff Merkley, D-Portland, would put an across-the-board cap on annual interest and fees for all consumer loans under $50,000 set at 30 percent above the federal reserve discount rate. The committee changed the lid from a flat 36 percent to a flexible rate tied to the federal reserve discount to avoid penalizing traditional lenders should interest rates soar as they did in the early 1980s.

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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.

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Payday loan and car title lenders turned out in force early Monday morning to tell a Senate committee why they oppose a bill that would put a 36-percent limit on consumer loans under $50,000.

“Thirty-six percent won’t work,” said Osjha Anderson of Atlanta, a lobbyist representing Georgia-based Northwestern Title Loans, which operates 16 car title stores in Oregon. “We will be gone. We’re not crying wolf. You will shut this industry down.”

People packed a Capitol hearing room and spilled out into the lobby to gather around television monitors during the hourlong public hearing, which began at 7:30 a.m. Many of them sported fluorescent green stickers that said “I Choose Payday Advance.” The Senate Commerce Committee will have a work session on the bill May 30.

House Bill 2871, which was approved by the House, is aimed at closing loopholes that payday and car title lenders might use to continue charging triple-digit interest rates, despite a 36 percent cap passed by the Legislature a year ago. Oregon’s 360 payday lenders on average charge 528 percent annual interest on small, short-term loans, typically for about $300 over two weeks.

Church representatives, food bank operators, consumer advocates, the Oregon Law Center and a lobbyist for the AARP of Oregon, the powerful retiree’s group, testified in support of the fast cash advance bill. Three out of four members of AARP support the bill, said Rick Bennett, the group’s lobbyist.

Jonas Monast, a lobbyist for the Center for Responsible Lending in Durham, N.C., said low-income residents with poor credit would still have access to small loans even if payday loan and car title lenders left the state. After payday lenders left North Carolina, he said, business doubled for traditional consumer lenders. Small loans are still available to people in the 34 states that have capped interest rates, in most cases at 36 percent annual interest, he said.

Most conventional no faxing payday loan lenders in Oregon, however, oppose the cap. It unnecessarily puts conventional lenders at a disadvantage with banks and credit unions that are bound by less restrictive federal regulations, said Paul Cosgrove, a lobbyist for the Oregon Financial Services Assoc. The group represents conventional consumer lenders, which make installment loans of two months or longer, unlike short-term payday loans.

Pam Sessions, who runs a payday advance lending store in Roseburg, said she supports a family of seven, including a disabled husband, and would face a 72 percent reduction in revenue under the 36 percent limit.