The Oregonian
By Jerry Boone
June 21, 2006
Beaverton took the lead Monday night in protecting Washington County residents in need of ready cash.Now it’s time for other local governments to follow the city’s lead. To date, no one’s lining up.
The Beaverton City Council moved forward a city ordinance that regulates the payday loan business, which has the potential to bleed its cash-strapped customers into bankruptcy.
If approved next month, it should take effect nearly a year earlier than newly enacted statewide controls.
"This gives immediate relief," says Dennis Doyle, the Beaverton City Council member who championed the ordinance. "And it gets something in place in Beaverton even if the Legislature backs off on the effective date."
Payday lenders give borrowers advances on paychecks and commonly charge annual interest rates that exceed 500 percent. If borrowers can’t pay, the loans are rolled over up to three times, with the money owed increasing.
When it met in special session April 27, the Oregon Legislature passed statewide controls on the industry, but the controls won’t take effect until July 2007. It caps interest rates at 35 percent annually, limits fees to $10 for each $100 borrowed and gives customers at least 31 days to pay off loans.
Beaverton’s ordinance extends the regulations by allowing customers to rescind their loans within 24 hours, requiring repayment of at least 25 percent of a loan before it is renewed and allowing installment payments if the loan is rolled over more than three times.
Most of the people who go to the quick-cash stores don’t have the credit rating to go to a conventional bank and get an unsecured loan.
"It takes people who already are in financial crisis and makes things worse for them," Doyle says.
Beaverton found a ready solution. Its ordinance isn’t groundbreaking legislation. It is almost a direct copy of one approved months earlier in Portland and later in Gresham.
"We copied Portland’s ordinance because it has already been challenged in court and upheld," Doyle says. "It was a proven ordinance, and we didn’t want to do anything that was going to end up in court."
It is being considered in other communities around Oregon. But officials in Hillsboro, Forest Grove and Cornelius aren’t mulling anything similar, despite the proliferation of payday loan shops in or near their cities. Nor is the Washington County Board of Commissioners, which can regulate businesses in the unincorporated areas outside city boundaries.
The commissioners’ lack of interest seems counterproductive to protecting the people they represent. That may be partly true because the people most likely to need the services of a payday loan shop are also among the least likely to show up at a board of commissioners or city council meeting.
If more local jurisdictions followed Beaverton’s lead, eventually the bulk of the payday lenders would have to comply with stricter lending rules, move to a community without local regulations or go out of business.
Doyle says Oregon is one of a handful of states that don’t control the quick-loan companies.
"I never realized they were unregulated," Doyle says. "I was absolutely astounded at what they charge people, especially when you discover that the default rate is lower than those for mortgages."
Doyle says he isn’t opposed to outlets offering quick cash to people who need something to tide them over for a while, but he objects to interest rates much higher than those charged at other lending institutions.
"I’d like to see more banks and credit unions stepping up to help people with a short-term need," he says.
"It’s good legislation," Doyle says. "But we need to see it go beyond just one city for it to be really effective."
Payday Loan Fairness: [x] Yes, [] No
©2006 Our Oregon. All rights reserved. Photos by Leah Nash.