Democratic legislators are working to strengthen fast payday loans laws, which advocates say cost borrowers from Keizer loan stores more than $420,000 in 2005 just in what they called “predatory” fees.

The legislation would further restrict the amount of interest payday cash advance lenders are allowed to charge to 36 percent annually. While proponents of the bill say it would bar lenders from charging what they call 300-plus percent annual interest, opponents seem to think the number-crunching is a bit disingenuous.

State Rep. Kim Thatcher, R – Keizer, said that while the fees on a two-week loan compounded over one year could add up to that amount, most borrowers pay their bill on time. Thatcher voted against House Bill 2871, which passed the House with Democratic support and is awaiting a vote in the Senate.

“These are usually repaid within a few weeks, and not within the period of years or months,” Thatcher said.

Legislation passed in 2006 capped the annual interest rate on a personal loan term of less than 60 days at 36 percent, but Our Oregon activist Angela Martin said payday loan companies simply extended the terms of their loans to 61 days, getting around the regulations.

According to numbers provided by Our Oregon borrowers paid payday stores in Keizer $422,000 in 2005 in penalty fees Martin refers to as “predatory.” They also said $4.7 million in fees were assessed from stores in Marion County during that same time.

It’s not the single borrowers who fall into what she called a “cycle of debt,” Martin said. With fees and interest, the amount ultimately owed to the payday loan company can balloon to double the principal amount if it is not paid on time. Some customers use a new no fax payday loan to pay off an old delinquent loan and the cycle continues, she said.

“When all you’re doing is paying more and more interest for no new money – that’s predatory,” she said.”

House Speaker Jeff Merkley, D – Portland, said it’s time to “take this genie, these 300 percent interest rates, back in the bottle.”

“We are concerned that payday lenders position themselves as the savior of low-income Oregonians who come to them,” Merkley said.

He said the advertising these bad credit cash loan companies pay for gives an impression of easy money, but in fact can lead the most vulnerable in society down the path of financial ruin.

The Keizer City Council addressed the issue in 2006, but ultimately decided to delay action to wait and see what the Oregon Legislature would do.

Thatcher said the legislation is “basically telling private businesses what they can charge for a product” and singling out one branch of the finance industry.

The bill’s opponents have said that these restrictions would essentially put cash advance payday loan stores out of business, and Thatcher said it would eliminate what for many Oregonians is a low-hassle way of getting money immediately.

(more…)

The Oregon Legislature is likely to impose a cap on interest rates for small consumer payday advances, a step Catholic leaders have long urged as a way to relieve financial pressure on low-income households.

House Bill 2871 would outlaw interest rates higher than 36 percent for consumer loans of less than $50,000. The legislation would also limit fees and block lenders from giving quick and repeated loan renewals.

The bill is up for debate in the House this week and is expected to pass before moving to the Senate. Gov. Ted Kulongoski has said he will sign the bad credit payday loan legislation.

The St. Vincent de Paul Society, which serves many low-income Oregonians, has taken a lead in calling for regulation of lenders.

“These people are taking advantage of families in crisis by offering them loans at exorbitant interest rates or exorbitant fees and then making it difficult for them to pay back,” says Maureen Sloan, who chairs a St. Vincent de Paul’s advocacy committee. “Unless people have the wherewithal to pay the loan back they get into deep trouble that none of us can get them out of.”

Backers of quick cash loan regulation hit the phones this spring to build citizen support and encourage contacts to legislators.

The Economic Fairness Coalition even has a faith outreach coordinator to work with churches.

“It protects Oregon families from loan sharking,” says coalition director Patty Wentz. “Usury is immoral and this will make it illegal.”

David Carrier, director of the Archdiocese of Portland Office of Justice and Peace, says that predatory lending “has disastrous consequences for the poor.”

Providers of payday advance loans have fought against the bills. In hearings, they have put forward happy customers who say the quick loans were helpful.

Also pending in the Legislature are a package of proposals that would regulate lenders further, from stiffening license requirements to limiting interest rates. They would also close loopholes on giving Internet loans from out of state.

The House overwhelmingly passed that collection of bills in February. They are now waiting in a Senate committee.

(more…)

This is a press release courtesy of the office of Oregon Representative Jeff Merkley…

The House of Representatives today approved a bill to impose a 36 percent interest rate cap on state-regulated payday cash loans in Oregon. The bill, HB 2871, provides strong protections for borrowers of the more than 850,000 short-term payday and car title loans issued each year in Oregon.

“In any other area of the law, no legislator would endorse a system that contributes to bankruptcy, divorce and despair. So we shouldn’t do that with consumer loans either,” said House Speaker Jeff Merkley (D-Portland). “We have a responsibility to provide opportunities for individuals and families to thrive. We need to support systems that build wealth, not strip wealth.”

Last year during a special session of the legislature, the House and Senate passed a 36 percent annual interest rate cap on short-term payday loans. Almost immediately, those lenders began to reorganize under the state’s conventional lending laws to avoid that cap. Under that law, a typical 60-day loan subject to the 36 percent cap could be offered without that cap if the lenders simply converted it to term of 180 days or more.

“Colleagues, this comes down to two simple questions,” said Rep. Chris Edwards (D-Eugene). “First, do you believe that there are loopholes in our previously passed legislation that will allow payday lenders to continue to charge exorbitant interest rates? And second, do you believe those loopholes should be closed? My answer to both of those questions is an unequivocal yes.”

Oregon is currently one of only 16 states that do not cap interest rates on consumer loans. Oregon had a 36 percent cap on consumer loans until 1981 when the legislature lifted it. Since then predatory fast payday loan lenders have flourished, charging rates on consumer loans that have at times exceeded 500 percent. That means a person who borrows $200 could end up paying an additional $1000 or more for the privilege of borrowing that money.

“In reality, the point of this legislation is to close the loopholes that would allow predatory payday lenders to skirt any of the previous legislation we have approved,” said Rep. Paul Holvey (D-Eugene), chair of the House Consumer Protection Committee. “This bill is a real win for Oregon consumers, as well as for the responsible consumer lenders who worked with us to craft the legislation.”

Across the country, states that had eliminated caps are reinstating them. Interest rate caps in other states range from 17 percent in Arkansas to 60 percent in , but most states have determined that a 36 percent rate cap on payday advances best guarantees access to credit while keeping usury in check. At the federal level, Congress recently enacted a 36 percent cap on consumer loans to all active duty military members and their families, underscoring the problem nationwide.

“I’m glad to see the legislature take on difficult issues and act on behalf of individual Oregonians and families, not for special interests,” Merkley said. “We all have a responsibility to restore fairness and protection for Oregon’s families – particularly those in difficult financial straits.”

The Oregon Predatory Lending Cap Act passed the House on a vote of 37-21. It proceeds now to the Senate for further consideration.

The Sawbucks company may have to close one of its shops.

The possible closure of one of the Klamath Falls payday loan company’s three locations stems from proposed Oregon legislation that would cap interest rates at 36 percent per year for all consumer loans less than $50,000.

The Consumer Protection committee approved the quick payday advance bill last week and it should be voted on in the House in the coming weeks.

The legislation is intended to curb a business that supporters say exploits low-income residents or those who live paycheck to paycheck. But Melissa Johnson, manager of Sawbucks, disagreed, saying many of her clients use payday loans to avoid bouncing checks and for other emergencies.

“I would say that it’s definitely not just lower income - we have quite a few customers who make very good money,” Johnson said.

The effects of capping interest rates are grim for these businesses, Johnson added. Currently, Sawbucks’ interest is $1.50 a day per $100 - an amount totaling more than 500 percent a year. The payday loan company hasn’t yet made any decisions of how it would handle the legislation.

Customers at Sawbucks go through an approval process, but many new customers take loans they don’t pay back, draining the company that relies on half its business from these loans, Johnson said. The company also provides check cashing.

“Because of the high risk of these loans, the percentage rate makes it so it’s not going to be that viable to do,” Johnson said.

Supporters of the new legislation argue that by charging high interest rates, no fax cash loan lenders prey on those who need a quick buck.

“It’s a very expensive form for people to borrow money,” said Dean Fortmiller, director of education at Medford’s Consumer Credit Counseling Service, which aims to recognize and address financial difficulties.

State Rep. Bill Garrard, R-Klamath Falls, supported the bill, but he said there’s still more that could be done. He believes all faxless cash advance businesses should have the same capped rate.

“Everybody ought to play on the same playing field,” Garrard said. “If we cap them, we should cap everybody else.”

He also thinks banks should step up and offer customers resources similar to payday loans.

Lawmakers advanced a bill yesterday that would cap interest rates at 36 percent per year for all consumer loans less than $50,000 in an effort to close loopholes in Oregon state law that supporters say is being exploited by quick payday loan shops.

The bill, sponsored by House Speaker Jeff Merkley and eight other legislators, would apply to payday and car title lenders, allowing them to charge a maximum fee of $10 per $100 of the loan amount or $30, whichever comes first.

“Predatory lenders have tried to find a way to get around the requirements,” said Rep. Suzanne Bonamici, D-Beaverton, a supporter of the bill. “This will make sure that all consumer lenders are within the 36 percent, which I think is very reasonable.”

The Consumer Protection committee approved the fast cash advance bill Monday and it should be voted on in the House sometime in the next few weeks.

Last year, lawmakers passed similar legislation that goes into effect on July 1, but that law applied only to a small segment of consumer lenders and didn’t stop car title and payday advance loan lenders who can charge annual interest rates of 300 to 500 percent interest a year.

“High-cost, payday and car title lenders are targeting the poor and people who are living paycheck to paycheck,” said Angela Martin, director of Economic Fairness Coalition of Oregon, who supports the bill. “Without a doubt, these lenders have a team of lawyers who have found a way through every conceivable loophole in states across the country.”

Martin said that payday lending is a huge industry. In Oregon she said there are more payday loan businesses than there are McDonald’s restaurants and about two-thirds of the businesses are owned by large, multistate companies.

Sixteen states including Oregon have no caps on the interest rates lenders can charge borrowers. Last year, the federal government passed a law capping interest rate loans for members of the armed forces after the Defense Department reported that one-fifth of active-duty service members use payday lenders.

However, payday and car title lenders say the Oregon bill will put them out of business. Other people say the legislation fails to address more fundamental problems.

“They are not providing an alternative, they are simply trying to wave a magic wand,” said John Charles, president of the Cascade Policy Institute, a conservative think-tank in Portland. “All the people they imagine themselves to be helping now have fewer options. If they have fewer options, how are they better off?”

But most of the lawmakers in the Consumer Protection committee supported the bill; some because of personal experience with faxless payday loans.

Rep. Donna Nelson said that she wanted to curb high-interest lending because she had “been there, done that.” The Republican from McMinnville said that the bill was critical to helping Oregonians down on their luck.

“Three kids, a destroyed leg, no job, no insurance, no house,” Nelson said she knew what it’s like to be wiped out by massive debt.

Nick Cavinta was spent - out of luck, out of favors, out of money.

The metalworker had gambled away his paychecks in casino blackjack games for two years — since a divorce that left him depressed and lonely. He’d tapped out friends, children, credit cards.

On this Saturday morning in 2001, after gambling all night, he slouched through the New Phoenix Casino, a cardroom in La Center, Wash., figuring he was finished. Then, a friend told him about a way he could keep gambling.

An hour later, Cavinta was at a no fax payday loan lending store in Portland. He borrowed $200 at the cost of $40 in interest - for a two-week loan, that’s an annual rate of 521 percent. Then he headed back to the New Phoenix.

Cavinta, now 53, estimates he took out 200 more no fax needed payday loans before getting help for his gambling addiction a year ago.

Counselors say problem gamblers commonly turn to payday lenders, often after they’ve exhausted other sources of money.

Payday cash advance lenders offer gamblers ready cash with no questions. And they’re convenient. With about 360 payday stores in Oregon, more than the number of McDonald’s restaurants or Starbucks coffee shops, most gamblers don’t have to go far to find money.

If payday lenders didn’t exist, problem gamblers “would hit bottom more quickly,” said Marcia Mattoso, a gambling counselor and outreach coordinator for Cascadia Behavioral Healthcare, a Portland nonprofit that operates the state’s largest gambling counseling service. Payday loans “make gamblers’ finances even worse than they were in the first place.”

Video lottery, the game of choice for most problem gamblers, sends broke players to bad credit cash loan lenders who in turn give gamblers more money to burn on video lottery.

During the past seven years, the number of payday loans in Oregon nearly tripled, to 841,000 a year; annual video lottery revenue increased by 82 percent, to $733 million; and the number of gamblers turning to counselors for help doubled, to 1,714.

Only a fraction of problem and pathological gamblers - estimated to number about 74,000 in Oregon - seek help, though the state sets aside lottery revenue to offer gambling therapy free.

A common practice
Counselors’ estimates on the proportion of addicted gamblers who turn to online payday loans range from 10 percent to more than half.

“If you’re going to make it really easy for desperate people to dig themselves into a deeper hole, they are going to do that,” said Josh White, clinical supervisor for the Oregon Health & Science University Behavioral Health Clinic in Portland. White estimates that more than half of the 80 gambling addicts served in his clinic have borrowed from payday lenders.

(more…)

There’s an easy way for Oregon to help low-income families in our state be more stable and productive, and to protect middle-income families who get caught by debt problems when, for example, medical bills mount unexpectedly:

• Oregon could protect these families from irresponsible cash advance lenders.

Oregon currently allows most consumer lenders to charge whatever interest rates they can squeeze out of their customers, no matter how desperate those customers may be.

Some Oregonians think that the state Legislature solved this problem last year when it enacted an annual interest-rate cap of 36 percent on no fax payday loans, to take effect this coming July.

Unfortunately, payday lenders have already found a way around the rate cap, even before it goes into effect. Because the rate cap will apply only to “short-term” consumer lenders, payday outfits are avoiding the cap simply by altering their loan product a bit and obtaining a new “conventional” consumer lender’s license from the state.

The cap on quick payday loan interest doesn’t protect consumers from other greedy lenders. Car-title lenders, for example, will remain free to charge unlimited rates of interest and fees. Check-cashing outfits also face no limits on their fees; these outfits are not even required to obtain a license from the state.

Gov. Ted Kulongoski has proposed a series of bills to improve the situation. One bill (House Bill 2205) makes it more difficult for short-term payday lenders to avoid the rate cap taking effect in July by morphing into “conventional” lenders. Another bill (HB 2204) extends the 36 percent interest-rate cap on short-term payday loans to short-term car title lenders. A third bill (HB 2202) requires check-cashing outfits to limit the fees they charge to cash government and payroll checks.

Each of the governor’s bills won the support of at least two-thirds of the Oregon House of Representatives. They now await action in the Senate.

Low- and middle-income Oregonians can applaud these bills. They would take Oregon a couple of significant steps forward in protecting desperate families from irresponsible providers of payday cash loans.

To fully protect consumers from greedy lenders, though, additional steps are necessary. Most importantly, Oregon needs a reasonable blanket interest-rate cap on all consumer loans. The only way to keep lenders from finding loopholes that allow them to skirt an interest-rate cap is to extend the cap to all consumer loans.

There are now more fast payday advance lenders in Oregon than McDonald’s and 7-Elevens combined. These outfits are canaries in Oregon’s mine shaft, warning us of the dangerous levels of desperation among our families. We can relieve the pressure by cutting down on the profit being made off economically strapped families. It’s the responsible thing to do.

Michael Leachman of Portland is a policy analyst for Oregon Center for Public Policy in Silverton.

The following is an editorial in Oregon’s The Register-Guard:

Trying to control predatory cash loan lenders is like playing the Whack-a-Mole game at the local arcade. Smack down one mole with your mallet and, sure enough, another pops up somewhere else. Then another. And another.

The state Legislature last year finally approved a new state law cracking down on the exorbitant interest rates that the Oregon payday loan industry uses to prey on desperate, cash-strapped residents. It didn’t take long before payday lenders began applying for a different license that enables them to continue charging the same piratical interest rates.

Last week, the House passed four new bills that close some mole-sized loopholes in last year’s payday loan legislation. That law, which does not take effect until July, limits charges on short-term loans to $10 per $100 on original loans and no more than 36 percent annual interest on subsequent rollovers.

Here’s a quick look at each of the new bills:

• House Bill 2203 would impose the same 36 percent annual interest rate cap and 10 percent limit on origination fees to out-of-state businesses that the new law applies to in-state payday cash advance lenders.

• HB 2202 would require a license for check cashing businesses and cap fees at $5 or 3 percent of the check, whichever amount is greater.

• HB 2204 would limit annual interest rates on car title loans to 36 percent and allow only a one-time origination fee of no more than $10 per $100 borrowed.

• HB 2205 would require consumer finance licenses for lenders and tighten language adopted last year by state regulators.

These are all solid bills that should help protect the working poor, students, seniors on fixed incomes and others who have been victimized by the faxless cash advance industry.

Not surprisingly, payday lenders are whining that the new rules will drive them out of business. That’s what they said last year when Oregon lawmakers finally were shamed into capping interest rates. The Legislature acted after cities across the state began adopting their own ordinances and a statewide coalition of religious groups and charities was preparing to put a statewide initiative measure on the ballot.

Of course, instant payday loan lenders have absolutely no intention of going out of business in Oregon, just as they haven’t gone out of business in neighboring California and Washington or the many other states that have clamped down on this rapacious industry.

Instead, they’ll start looking for new loopholes that allow them to continue gouging the poor.

When state lawmakers get tired of whacking moles, they should add Oregon to the growing list of states that have imposed a blanket interest rate limit on consumer cash loans of all types. It’s the only proven way to keep predatory lenders from taking advantage of the state’s poorest and most vulnerable citizens.

About one in eight low-income Oregonians pays a fee to have payroll or other checks cashed, according to a new analysis by a public interest research group and printed in The Oregonian.

The analysis, by the progressive Oregon Center for Public Policy, concludes that about 100,000 Oregon adults with incomes of less than $30,000 paid a fee to cash a check in the year just before a survey taken last summer.

“The new data indicate the check-cashing fees are a drain on the incomes of many low-income Oregonians,” said Michael Leachman, a policy analyst with the center. National data indicate that nine out of 10 customers visit cash advance services at least once a month, he said.

The analysis was done by looking at responses on the Oregon Population Survey, a biennial questionnaire paid for by state agencies to take a snapshot of Oregonians’ incomes, education, jobs and purchasing habits, among other topics. Last year, the survey included six questions about Oregonians’ banking and lending habits.

About 4,500 households were surveyed; from that the Oregon Center for Public Policy extrapolated statewide estimates about use of payday advance lenders and check-cashing services.

The analysis comes at a point when several bills aimed at reining in the high rates charged by short-term lenders and check-cashing services are moving toward a vote in the Oregon House — probably next Thursday. One would restrict fees charged by check-cashing businesses, which are now unregulated.

Two others put out-of-state online payday loan lenders and companies that make car title loans under the same 36 percent interest rate cap imposed on in-state payday lenders last year in a special session of the Legislature. The center’s analysis found that 9 percent of payday loans are made over the Internet.

A fourth bill tries to prevent car title and payday lenders from escaping the interest restrictions by buying conventional consumer-lending licenses, which are not subject to the 36 percent cap. It would require Oregon payday loan lenders with conventional licenses to have 90 percent of their loans exceeding six months, and be approved by experienced underwriters.

Leachman said the public policy center analysis showed that residents in Crook, Deschutes and Jefferson counties in Central Oregon were most likely to pay to cash checks. Sixteen percent of all adults in those three counties in the survey reported paying personal cash loan fees.

Cory Streisinger, director of the Department of Consumer and Business Services, said the bills are needed to address the problem of short-term, high-interest loans in Oregon. Patty Wentz, spokeswoman for Our Oregon, said a blanket interest-rate cap is needed for all consumer lending companies.

Our Oregon is working on a bill that would extend the 36 percent cap to all retail payday advance loan lenders, except banks and credit unions.

Proposals to close loopholes in tough new restrictions on easy payday loan lenders are headed for the House floor, after winning approval from members of the House Consumer Protection Committee Wednesday.

Among other measures, the new rules would limit the maximum rate of interest on car title loans to 36%, a big change on rates that can run more than 300%.

Proposals under consideration would also prohibit providers of no faxing payday loans from avoiding the state’s caps on interest rate charges by applying instead for a different type of license that applies to longer-term installment loans, which hadn’t been subject to interest rate caps.

The new legislation follows action in last year’s single-day special session, when lawmakers approved restricting charges on short-term loans and a 36% interest cap on loans that are renewed.

The payday loan industry, which makes small loans as advances on paychecks, has been growing exponentially in Oregon; there are now at least 350 such outlets.

A report from the state Department of Consumer and Business Services said payday lenders made more than 840,000 loans in 2005, a 15% increase over the previous year. More than 100,000 Oregonians had problems repaying such loans in 2006, according to state estimates.

Critics have argued that interest rates on such loans need to be tightly regulated, or else borrowers can be trapped in an endless spiral of debt. But those in the no credit check payday loan industry have said they fill an important niche for the thousands of Oregonians who don’t have a checking account and a bank, and the new rules could drive them out of business, as well as lead to a rash of bounced checks.

Other proposed rules that won the endorsement of the Consumer Protection committee Wednesday included:

- Development of a state database lenders can tap into to track whether potential borrowers have outstanding loans, and if so, how many.

- Limit fast cash loans against car titles to terms of less than 31 days.

- Extending the interest rate caps to Internet-based and out-of-state lenders.

(more…)