The Oregonian
July 9, 2006
Debt equals opportunity if you’re rich. If you’re poor it’s just another way to get poorer.
This spring, the Oregon Legislature cracked down on payday loan stores that drag low-income families deeper into debt. Legislators outlawed the practice of charging steep fees, plus annual interest rates that exceed 500 percent, on short-term loans. Their intent was to keep the payday loan industry from taking unfair advantage of customers’ desperation or ignorance.
They did an important public service. However, they left a big loophole in their legislation, as The Oregonian’s Bill Graves reported last Sunday. The new law, which takes effect next July, applies only to payday lenders.
It doesn’t cover conventional lenders, who are licensed to make longer-term loans that are paid back in installments. It also doesn’t cover car-title lenders.
The payday loan industry appears to be repositioning itself in response. About 20 percent of Oregon’s 363 payday loan stores have already upgraded to conventional licenses, for example. This will allow lenders to skirt the new rules and continue charging extortive interest rates.
The state should respond in two ways. First, if legally possible, state regulators should extend the payday reform law to cover car-title loans. This would limit the number of low-income families who end up losing their car or paying its value several times over in interest.
Second, the state Legislature should require conventional lenders to live under the same rules as payday lenders: No fees greater than $10 per $100 on an original loan, and no annual interest rates higher than 36 percent.
Oregon can’t solve the problem of predatory lending through legislation alone. These lenders are, in many ways, a symptom of deeper problems: Too many families can’t make ends meet. Too many uninsured people get socked with unexpected medical bills. Too many teenagers never learn about personal finance.
As long as Oregon fails in these areas, it will continue to have the highest number of payday loan stores, per capita, on the West Coast.
But in the short term, Oregon can at least effectively regulate this fast-and-loose industry. It’s one small way to help low-income people avoid bankruptcy --and experience debt the way wealthier people do.
As a convenience.
Not as a trap.
Payday Loan Fairness: [x] Yes, [] No
©2006 Our Oregon. All rights reserved. Photos by Leah Nash.