By Thomas Dodd
Eugene Register Guard
March 20, 2007
The payday push-back has begun! The payday and title loan industry is funding a $10 million advertising campaign to deflect criticism, help it avoid substantive regulation, and make it appear that it is a responsible service provider. This push-back is going on in Oregon, California, Texas and many other states.
Part of the push is composed of TV ads that have been aired in our area and throughout the state. These ads are polished. Unfortunately, their content takes a low road.
They are self-serving when they say that payday lenders want their customers to "borrow responsibly." These lenders say this when their loan rates are often 520 percent annually. It would seem that responsibility would begin with a fair interest rate.
The ads also use scare tactics. One features an elderly woman saying that she would have been unable to get her insulin in a timely manner without getting a title loan on her car. The announcer then implies that the state Legislature is trying to "take away title loans."
This is far from the case. The Legislature is acting to regulate payday and title loans, not stop them.
The industry push-back also includes statements saying that if payday loan companies are restricted to a 36 percent annual interest rate, the industry would be forced out of business - which would open the way for "real loan sharks." Once again, scare tactics, this time with implications of mob figures breaking arms when high-rate loans are not paid. It’s revealing that the closest example the industry can come up with to describe itself is that of the loan shark.
In addition, those who speak for these companies claim that if real regulation were approved, payday lenders still would get their product out. The implication is that these lenders will find a way around regulations.
An example of just such a practice comes from Texas. The Dallas Morning News reported on March 5 that after regulations went into effect, the payday lenders started "using anonymous third-party lenders under state laws regarding credit services organizations, or CSOs, the companies that offer to help repair your credit." By doing this, the payday lenders have hidden behind the good name of CSOs to regain access to people who need financial help - not more high-interest loans.
One Texas state representative was quoted as saying, "Since the switch to the CSO model, prevailing interest rates have increased 25 to 40 percent." As a result, payday loan companies have not only avoided regulations but have gouged deeper into the wallets and lives of those who they claim to serve.
Let’s revisit the ad that features the elderly woman who says that getting a title loan on her car was the only way should could get her medicine. The ad implies that in a financial storm, any port, no matter what the cost, will do. Or to put it another way, everybody should have the right to enter into a contract, even if doing so is against their interests.
Yet in Oregon, many Oregon credit unions offer short-term consumer loans at an 18 percent annual rate. Instead of paying $60 to $85 for a 30-day loan of $200, the borrower taking a loan from a credit union would pay $3. To find a credit union that participates in such a program, call toll-free (800) SAFENET (723-3638).
Finally, payday lenders and their defenders frequently claim that price controls have never worked. This is simply not true. For decades, Oregon had usury laws that regulated the amount of interest a lender could charge. These laws provided a safeguard for those in need, while providing a workable profit for those lending the money.
The Oregon Legislature already has taken steps to regulate payday loans. Further action is needed: House Bill 2871 would set an across-the-board cap of 36 percent on all consumer loans. Call your legislator - (800) 332-2313 - to say you support HB 2871. The bill is scheduled to be discussed Friday.
Thomas Dodd of Eugene is pastor of the United Lutheran Church.
Payday Loan Fairness: [x] Yes, [] No
©2006 Our Oregon. All rights reserved. Photos by Leah Nash.