Bend Bulletin
By Christine Metz
July 6, 2006
The Bend City Council gave the first of two necessary approvals to an ordinance that would make doing business a littler harder for payday lenders. At a meeting Wednesday night, the City Council expanded restrictions on what some call predatory lending agencies - businesses that offer short-term loans at high interest rates.
The city regulation that would likely have the largest effect on payday lenders is a requirement for borrowers to pay off 25 percent of the original loan plus the interest on the remaining balance. The ordinance would also allow borrowers 24 hours to cancel the loan.
Payday loans are a service that many people can’t receive through their banks. In most cases, payday lenders charge between $10 and $35 for every $100 borrowed. In order to get the money, borrowers have to have a job and a checking account. Most borrowers
write a check to the lender for the amount they borrowed. The lender then can cash the check following the borrower’s next payday.
The intention is for the loans to be paid off in two weeks or a month. If it is not, the loans can be rolled over with an additional fee. For every time the loan is rolled over, which in Oregon can be three times, another fee is added.
Interest on the loan can accumulate up to a 521 annual percentage rate, meaning someone who borrows $300 could end up paying $540. Councilor Chris Telfer proposed the legislation after hearing about payday loan problems from a group in her churchthat is working on a low-income credit union.
"People get into these loan deals by borrowing money to pay bills, medical expenses and groceries," Telfer said. "It sets poor people up for defeat. The fees become more
than the loan."
The city’s ordinance would also require lenders to set up for no additional charge a 60-day payment plan for borrowers after the loan is rolled over the maximum number of times.
Five other Oregon cities have passed similar legislation.
At Wednesday’s meeting, residents encouraged the City Council to pass more regulations on the loans. Bob Knudtzon, who works with Habitat for Humanity in La Pine, said one woman the organization was helping was hurt by these kinds of loans.
The woman’s car broke down, she borrowed money to fix it and because of the predatory nature of the loan, her credit was hurt and she no longer qualified for the
Habitat for Humanity house, Knudtzon said. Dave Nagler, the pastor at Nativity Lutheran Church said the city’s requirement to allow borrowers to pay down part of the loan and lower interest rates over time, compared to the system now of paying off the loan at once or else roll it over, would help.
"What we are asking for is an ordinance that provides basic consumer protection," Nagler said. No one representing payday lenders spoke at Wednesday’s meeting. In April, the state added regulations concerning payday loans, lowering the annual interest rate to 36 percent and stipulating that lenders can not charge more than a 10 percent fee on the first loan. The borrower would also have 31 days to pay the loan off and the loan can only be rolled over twice.
However, state law will not go into effect until July 2007.
Payday Loan Fairness: [x] Yes, [] No
©2006 Our Oregon. All rights reserved. Photos by Leah Nash.