During the debate about payday loan reform, industry spokesman Mark Thompson gave startling testimony revealing how far payday lenders will go to protect their high profits.
In his testimony to state lawmakers in April 2006 he claimed that passing the Payday Loan Reform Act won’t stop lenders from charging exorbitant interest rates. Instead, he explained, “Lenders will develop new products that are unregulated,” he said, “You will see an increase in scam-type transactions.”
He was right!
Lenders developed a new payday loan product as a way to evade the interest cap and other protections that will apply to short-term payday loans. Here’s how.
The new law affects only payday loans. Payday loans are defined as short-term personal loans made for 60 days or less. Conventional consumer loans are defined as longer than 60 days and typically feature payments covering both principal and interest until the loans are paid off. Lenders making conventional consumer loans can charge as much as they want because Oregon is one of only 16 states with no cap on interest.
Payday lenders know Oregon has no interest cap on consumer loans and they are using this fact as a loophole to the new law. These new high-cost loans are at least 61 days long but they carry interest rates as high as 370%.
It’s time to end usury in Oregon. Get involved today!
Payday Loan Fairness: [x] Yes, [] No
©2006 Our Oregon. All rights reserved. Photos by Leah Nash.