The Oregonian
Bill Graves
February 23, 2006
"This fulfills government’s fundamental responsibility to protect the vulnerable," said Commissioner Sam Adams.
Commissioner Dan Saltzman, who introduced the new law, said payday lenders are trapping low-income elderly and families in debt with exorbitant interest rates that commonly exceed 500 percent. He said the law helps level the playing field between lenders and borrowers.
The law, which took effect immediately, gives Portland’s 69 payday loan stores 60 days to pay the $1,500 permit fee and to comply with the regulations. Gresham and Troutdale officials said they plan to vote on a similar law next month.
The Portland City Council has no authority to curb interest rates, but the Legislature does. Two legislative interim committees are exploring regulations for the state’s 356 payday stores.
Voters, however, may have a chance to act first. Community activists and religious and union leaders are pushing an initiative for the Nov. 7 ballot that would halve fees for most payday loans, limit annual interest on extensions to 36 percent and limit loan terms to no less than 31 days.
Portland’s new law requires payday lenders to give borrowers a payment plan, without penalty, if borrowers have trouble repaying their loans. It also gives borrowers the right to opt out of a loan within 24 hours.
The law bars payday lenders, who make small loans averaging $300 for one pay period, from extending or rolling over a loan for another pay period without collecting at least 25 percent of the principal. State law allows lenders to make as many as three rollovers.
Lenders now commonly charge $20 for each $100 they lend, which on a typical two-week loan translates into a 521 percent annual interest rate. They charge the same for each rollover. So after three rollovers, a borrower pays $240 in interest alone on a $300 loan.
Payday lenders said during the Wednesday evening public hearing that they are meeting a need and receive few complaints. They said they already provide payment plans and allow borrowers to rescind loans within 24 hours.
The hearing drew about 70 people to the Mt. Scott Community Center in Southeast Portland, where half of the city’s payday loan stores are concentrated.
Lenders urged the City Council to delay action. Richard Duvall, owner of Paycheck Advance Northwest Inc. in Northwest Portland, said if lenders treated people poorly, they would go out of business because borrowers would not come back.
"How about individuals being responsible for themselves?" he asked.
Payday loan borrowers, legislators, food bank workers, church leaders and others spoke in favor of the law. Some people held signs that read, "Protect Working Families" or "Loan Sharks Out."
Dena Speer, 58, of Southeast Portland described how she and her former husband became buried in about $8,000 of debt to at least seven payday lenders before they went bankrupt late last year.
Rep. Jeff Merkley, D-Portland, said repeated attempts to pass regulations in the Legislature have been snuffed by campaign contributions from the payday loan industry.
"Cities and counties can step in where the Legislature has failed," he said.
Maryann Olson, 57, who lives on disability income in Southeast Portland, described how she took out a payday loan for $100 to buy orthopedic shoes. Unable to repay the loan, she borrowed from a second payday lender to pay the first and from a third to pay the second and so on until she owed six lenders.
Her banking account is overdrawn by $461, she said, and all of her monthly $618 check goes to rent and loans.
"It has been devastating," she said.
Payday Loan Fairness: [x] Yes, [] No
©2006 Our Oregon. All rights reserved. Photos by Leah Nash.