Limiting payday loans
A state Senate bill would keep interest at 180 percent a year, raising the ire of local operators
Getting a payday loan is easy. You walk in with your paycheck stub and some ID, write a postdated check for two or three weeks from now and stick out your hand.
The hard part for many borrowers is paying it back, especially with annual interest rates topping 500 percent ' and facing due dates that may be hard to meet, especially for people getting paid by the month.
Senate Bill 545 seeks to change all that, limiting interest to &
36;15 per month per &
36;100, which is 180 percent a year, according the one of the bill's sponsors, Rep. Jackie Dingfelder, D-Portland.
Payday loans are one of the root causes of hunger in Oregon, Dingfelder said in a telephone interview from Salem.
It's a form of predatory, unregulated lending that affects low-income and otherwise vulnerable people, trapping them in a cycle of exorbitant and recurring loans.
— The bill would also impose minimum 31-day loan periods, heading off the habit of rollovers ' refinancing the loan with added fees when the borrower can't meet the short due date, she said.
Jenna Hedges, manager of Quik Check in Medford, called the bill a bunch of crap supported by a governor who never had to scramble to meet monthly bills.
The governor would like to shut them all down, she said, and if this passes, we're going to lose a lot of money, maybe half our business.
Dingfelder disagreed, saying the legislation would bring Oregon into line with California and Washington, where, despite such regulation, payday lenders are growing at a rate of 84 percent a year. Oregon is one of only eight states without regulation and, she added, anyone with the money is free to set up a payday loan shop and lend at any rate they want.
This regulation is a modest approach, said Dingfelder. We're not asking for the moon. This is a lucrative business that preys on people who are living on the edge and not making enough to make ends meet. We are seeing it in the number of people coming to food banks, people who pay for rent, health care and car repair bills, then don't have any money left for food.
Payday loans expanded in Oregon from &
36;64 million in 1999 to &
36;215 million in 2003, said Dingfelder, who is a member of the state Hunger Relief Task Force.
Hedges said more than 1,500 local clients have filled out postcards saying they use and value the convenience and availability of payday loans, rather than having to borrow from friends or relatives ' and consider loan costs to be fair and reasonable.
What we have is not bad and no one has to come here and do this if they don't want to, said Cindy Haberkost, manager of Chek Cash Northwest in Medford, which loans for 14 days ' more at an additional dollar per day per hundred borrowed.
Still, the bill is not a horrible thing, Haberkost said, and will protect people on fixed incomes, such as Social Security ' and those who get in the bad habit of getting loans from many payday lenders at the same time.
It's a real danger if people start going all over the place and borrowing, she said.
Payday loans are a short-term answer if you need money real quick, said a Medford borrower, who asked not to be identified. It's really easy to get in. I got &
36;200 I needed to get out of town on a family emergency. It's not something you want to use frequently, though.
When two men pulled up to a Medford payday loan shop Tuesday, one said he was not scared to get a loan, but his friend said, You should be. It's outrageous interest. You go in for &
36;200 and (with maximum rollovers) end up paying &
Peggy Hopkins, regional manager of Quik Check in Grants Pass, said, We provide a wonderful service for people and the state doesn't have the right to tell people how to spend their money. If people could see the help we provide they would change their minds. For instance, we loaned &
36;50 to a man to get medicine for his gout, which was causing him a lot of pain. He would have had to wait five days for his paycheck to buy it, but when he got paid he cleared his loan with only a &
Banks oppose regulation of payday lenders, she added, because they make so much money from overdraft fees.
They depend on that income, Hopkins said. They don't like us. They should pass bills against that. The average client here does not get buried (in debt), but they do with credit cards and bank fees.
The state Consumer and Business Services Division is sponsoring another bill, SB634, which would require lenders to make a good-faith effort to ascertain the borrower's ability to repay loans, including finding out the ability to handle rollovers and learning if payday happens before the loan due date, said agency spokesperson Steve Corson in Salem.
Now, they ask now questions, Corson said. They provide a financial service with high fees that provides options for consumers with few or no options, but which places them at risk of greater indebtedness.
The dollar amount of payday loans has grown 285 percent and the number of loans has grown 138 percent in the last five years, Dingfelder said, making the industry the biggest chain in Oregon, with more outlets than McDonald's.
Cash-strapped Oregonians need access to reliable and affordable credit, she added, and this bill is a step in that direction.