By David Steves
The Register-Guard
May 29, 2007
SALEM - A high-stakes game of cat and mouse resumes this week as the Legislature revisits its pursuit of payday and car-title lenders and their triple-digit interest rates.
At the same time, those short-term lenders will try their latest maneuver to get out from under the most recent attempt to regulate their fees and interest rates - or put them out of business, as the industry itself sees it.
They’ve spent much of the session recruiting customers to lobby on their behalf, prompting critics to accuse them of using coercive tactics that include the implication that their loans may not be processed if they don’t pitch in.
For many critics of the short-term lending industry, it seemed that this work had been done last year, when a one-day special session of the Legislature produced a 36 percent cap on the annual percentage rate, or APR.
Cory Streisinger, director of the Department of Consumer and Business Services, which weighs the lending companies’ relicensing applications, said it’s possible that by the time that 2006 law takes effect July 1, it could be that 20 short-term lending companies with 138 Oregon locations no longer will be affected by the law’s restrictions.
That’s because all have applied to be relicensed by the state as "conventional" rather than "short-term" lenders - a move that could exempt them from the 2006 interest and fee restrictions.
This possibility angers Angela Martin of Our Oregon, a labor-backed group that pushed for last year’s payday loan restrictions.
"I had no idea the lengths to which lenders would go to evade the law," she said.
The industry says it’s not evading the law, it’s simply trying to stay in business and offer convenient credit to clients with nowhere else to turn.
"I think there’s a genuine, legitimate concern that people are going to lose legitimate, legal options for getting short-term credit," said Jim Gardner, a lobbyist for the company that runs 25 Cash Store payday lending locations in Oregon, including three in Eugene-Springfield.
Our Oregon and other critics of payday and title lenders, including such high-ranking lawmakers as House Speaker Jeff Merkley, D-Portland, haven’t taken the industry’s move lightly.
They’ve passed a series of House bills, which await final Senate committee work scheduled for Wednesday.
The latest in the batch is House Bill 2871. It would counter the industry’s relicensing strategy by setting a blanket interest-rate cap of 36 percent APR for both short-term lenders and conventional consumer-finance lenders.
The industry’s countermove: an amendment to the bill so short-term and conventional consumer-finance lenders can’t be hit with restrictions on fees and interest rates that aren’t also set for banks and credit unions.
Gardner said the change would create a "level playing field" for all lenders. And he cited a letter from Portland lawyer Charles Hinkle, an expert on the Oregon Constitution, to back up the idea.
Hinkle wrote that such a change in the bill would lessen the risk that the legislation would run afoul of the Oregon Constitution. Without the change, he wrote that the bill would violate the constitution’s prohibition on "special" laws that applies to some but not all within a class.
Martin said the amendment would have the effect of halting the Legislature from regulating payday and title lenders, since states are barred from regulating nationally chartered banks.
Sen. Floyd Prozanski, the Commerce Committee chairman, is overseeing his chamber’s work on the short-term lending bills.
Because of that role, the Eugene Democrat has been among the lawmakers subjected not just to efforts by lobbyists and industry leaders to alter or drop the bills. They’ve also been contacted by dozens of customers urging them to leave the payday and title loan industry alone.
Jill Rollins O’Connor, a title loan customer from Hillsboro, said that’s exactly what happened to her. She had entered a Northwest Title Loan store in February, looking for a short-term loan to help her make that month’s rent payment.
Before the worker there processed her loan papers, she told O’Connor, " `Well, we first need you to call this number letting the Legislature know you oppose this bill,’ " the Hillsboro woman said.
"I felt kind of pressured, like if I didn’t agree to make the phone call, I wouldn’t be able to get the loan," said O’Connor, adding that she also was offered a $5 gift card from Starbucks as an inducement.
O’Connor, a health care technician, said she took out the February loan with plans to repay it right away and get back the title to her 1993 Jeep Cherokee. But from her past experience with title loans, she’s not surprised that hasn’t happened.
"It doesn’t work out that way. Ever. And that’s how they make their money and that’s how they get you," she said.
One of Prozanski’s letter writers, Dwayna Myers of Drain, said no one at her payday lender, Cottage Grove’s Check Into Cash, pressured her to write the letter.
Myers said she works in the hospitality industry and relies on such loans to pay for insulin for her diabetes when she is caught between paychecks.
"I like the payday loans because we live payday to payday," she said. "Different things crop up and it’s a way to get money fast."
Payday Loan Fairness: [x] Yes, [] No
©2006 Our Oregon. All rights reserved. Photos by Leah Nash.