The Oregonian
By Bill Graves
May 04, 2007
Oregon moved closer to a total cap on interest rates Thursday, when the state House passed a 36 percent limit on consumer loans under $50,000.
The cap completes House approval of a package of bills aimed at banning the triple-digit interest rates charged by payday and car title lenders.
"This doesn’t end consumer lending," said House Speaker Jeff Merkley, D-Portland. "But it will end predatory interest rates."
The House voted 36-21 in support of House Bill 2871, which will join four other bills pending in the Senate. Oregon’s payday lenders, who operate about 360 stores, say the legislation will kill their businesses.
In its special session last spring, the Legislature passed a law limiting payday lenders to charging no more than $10 per $100 for an initial fee on small loans and no more than 36 percent annual interest on renewals or rollovers of the loans. That law goes into effect July 1.
This session’s bills are aimed at bringing car title and Internet payday lenders under the 36 percent cap and blocking paths lenders might take to skirt the regulations.
Payday and car title lenders typically buy short-term licenses to make small loans, commonly for about $300, over two or three weeks. After the Legislature capped interest rates on those loans, the lenders began buying licenses to issue longer-term conventional consumer loans, which have no limit on interest.
The across-the-board cap on consumer loans plugs that loophole and would put Oregon among 34 other states with interest limits, said House Speaker Merkley.
"With earlier legislation, we ended triple-digit interest on loans of less than 60 days," he said. "With this, we end triple-digit interest on loans of more than 60 days."
Senior citizen, hunger relief, church and consumer-rights groups have criticized payday and car title lenders for taking advantage of low-income and desperate people. Oregon’s payday lenders on average charged a 528 percent annual interest on the 841,000 small loans they made in 2005.
Six Republicans joined 31 Democrats in voting for the cap Thursday. Opponents said consumer lenders have caused no problems warranting regulation and could be hurt by the cap if there is significant inflation. Several said any cap on consumer loans should be tied to the prime rate and adjusted as inflation rises and falls.
Rep. Dennis Richardson, R-Central Point, said it was hypocritical of the state to crack down on payday lenders for exploiting low-income residents.
"We as a government take advantage of the poor and needy by raising money through the lottery," he said.
House Minority Leader Wayne Scott, R-Canby, said Thursday’s bill was unnecessary because earlier bills passed by the House would put payday lenders out of business.
But they won’t all leave, Merkley said. "You’ll end up with fewer store fronts, less overhead, but the same service provided at a much more reasonable rate."
Payday Loan Fairness: [x] Yes, [] No
©2006 Our Oregon. All rights reserved. Photos by Leah Nash.