Bill Graves
The Oregonian
July 28, 2006
Payday loans The warning not to dodge new limits comes at the launch of a promotion for credit unions’ lower ratesGov. Ted Kulongoski vowed Thursday to block quick-cash lenders who try to skirt the Legislature’s recent crackdown on high-interest payday loans.
Anybody charging 250 percent to more than 500 percent annual interest on loans "is a predatory lender," he said. "You cannot and should not do this to people."
The governor made his comments during a Portland news conference announcing a campaign by Oregon credit unions to offer payday-type loans at much lower interest rates.
Payday lenders commonly charge 520 percent annual interest on two-week loans, while credit union rates range from 12 percent to 19 percent. A typical $200, 30-day loan would cost between $60 to $85 from a payday lender. The same loan from a credit union would cost $3.
Payday lenders do not object to credit unions offering similar loans, said Luanne Stoltz, owner of a Portland payday loan store and vice president of the Community Financial Services Association of Oregon, a group representing the state’s payday loan industry.
"We have always made it clear that we support consumer choice and consumer information," she said.
But the state’s effort to regulate short-term lenders threatens the industry, she said, noting she will close one of her two payday loan stores today.
"We are still just reeling from the previous legislation," she said. "I don’t think that history has proven price fixing was ever an advantage to the consumer."
Payday lenders have thrived in Oregon, doubling in number to 363 stores since 1999. They made 732,000 loans worth $245 million in 2004. Lenders who secure small loans with car titles made another 67,000 loans.
The high-interest lenders also sued more than 12,000 Oregonians, most in the past five years, to collect their money.
The Legislature passed a law in April limiting payday loan charges to $10 per $100 on the original loan and no more than 36 percent annual interest on any extensions or rollovers.
But the law does not take effect for another year. And it does not apply to car title lenders, check-cashing stores or to consumer lenders with conventional licenses that allow them to make installment loans for longer than 60 days.
At least 66 of the state’s payday loan stores have bought conventional licenses, which could allow them to restructure loans at high interest rates without being affected by the new law.
"I can guarantee you we are going to close that loophole," Kulongoski said.
The governor said he will take either administrative action through the Department of Consumer and Business Services or push legislation to cap interest rates on conventional lenders, check-cashing stores and car title lenders.
Ron Saxton, the Republican challenger for governor, won’t try to change the Legislature’s payday loan reform law, said Felix Schein, his campaign spokesman. Saxton has not determined whether he would take further action.
"Ron is less eager to regulate business than the governor," Schein said. "The goal is to both meet consumer demand and protect consumers from abuses, and there is a fine line. . . . Excluding a significant part of the population from obtaining a line of credit should not be the goal."
At least 23 of Oregon’s 85 credit unions offer payday-type loans, and most Oregonians would qualify to join at least one of them, said Patricia Smith, chief executive officer of the Unitus Community Credit Union in Portland and co-chairwoman of the Credit Union Association of Oregon.
Rather than trying to make money, she said, the nonprofit credit unions use the loans to educate consumers about how to manage their money and build credit and wealth.
The credit unions will team up with the state next month to sponsor public education announcements about the loans on television and radio stations statewide. The announcements will promote a toll-free number and Web site where borrowers can get information about credit unions that offer cheaper payday loans and also get information on other social services for low-income residents.
That connection creates "an important relationship for reducing poverty and hunger in this state," said Angela Martin, economic fairness director for Our Oregon, a progressive nonprofit group in Portland.
Oregon is closing avenues to predatory lending, she said, and opening doors to responsible, affordable loans.
Payday Loan Fairness: [x] Yes, [] No
©2006 Our Oregon. All rights reserved. Photos by Leah Nash.