By Bill Graves
The Oregonian
February 01, 2007
SALEM -- Four bills to regulate check cashing businesses and high-interest money lenders were approved Wednesday by a legislative committee and sent to the House floor for a vote.
If approved, the new laws would cap interest rates at 36 percent for short-term title lenders, restrict fees charged by check cashers, regulate Internet lenders that make loans in Oregon, create an electronic tracking system for payday loan borrowers and make it difficult for lenders to use a different license to avoid caps on interest rates.
The action by the eight-member House Committee on Consumer Protection appears to be "a response to the overwhelming approval Oregonians expressed about doing something about payday loans and other egregious practices," said Ellen Lowe of Portland, a lobbyist for the Oregon Food Bank. "What they did as a committee is catching up with where the people are."
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But Angela Martin, director of Our Oregon, a progressive nonprofit group in Portland, says the state needs to put a cap of 36 percent on all interest rates.
"Unless you make lending money at 500 percent illegal," she said, "they will find a way to lend money at 500 percent."
Lenders say the four bills, along with a measure passed by the Legislature last spring to take effect July 1, would effectively kill short-term loans of less than 60 days in Oregon.
"Although they couch this in terms of consumer protection, what they have done is eliminated any kind of consumer loan that is less than six months," said Luanne Stoltz, a Portland payday store owner and vice president of the Community Financial Services Association, which represents payday lenders.
A law passed by the Legislature in last April’s special session limits payday lenders to charging a one-time fee of $10 per $100 on small loans, plus 36 percent annual interest when the loans are renewed or rolled over. The 360 payday loan stores in Oregon, on average, make loans of about $300 and charge 528 percent interest.
Two bills approved in committee Wednesday would extend the new law’s restrictions to out-of-state Internet payday lenders making loans in Oregon and to car title lenders that use titles as collateral in making small, high-interest loans. But these bills only apply to lenders using short-term licenses.
Payday and car title lenders have also been buying conventional consumer licenses, which are unaffected by the 36 percent cap, so they can keep making high-interest loans.
One bill approved by the House committee Wednesday attempts to plug that loophole by requiring 90 percent of the loans made under a conventional license to exceed six months and be approved by experienced underwriters.
A fourth bill passed out by the committee would restrict fees charged by check cashing businesses, which are now unregulated. It would limit charges to $5 or, if it is greater, 2 percent of the check value for state, federal and city checks; 3 percent of the value for payroll and other government checks; and 10 percent of the value for personal checks. Fees for any check cashed could not exceed $100.
The bills will be scheduled for a House vote then be sent to a Senate committee for consideration.
Payday Loan Fairness: [x] Yes, [] No
©2006 Our Oregon. All rights reserved. Photos by Leah Nash.