After months of criticism over payday loans in the state by consumer groups, Oregon has finally joined 43 other states Thursday in capping interest rates on cash loans of this nature.

Lawmakers at Thursday's special legislative session said that will reduce predatory quick cash loan lending practices that put Oregonians in an endless cycle of debt. Many people wind up paying annualized interest rates of 500 percent to cover various bills.

Senate Bill 1105 sets a $10 payday loan fee for each $100 borrowed, caps interest at 36 percent annually and requires a minimum loan duration of 31 days.

With the payday advance fee factored in, that's an annualized interest rate of 153 percent, said Charles Donald of the state Division of Finance and Corporate Securities.

A survey found that many state workers use payday loans to buy groceries, said Rep. Debi Farr, R-Eugene, during a floor debate. "How can we justify charging $216 for $300 worth of groceries?"

The Legislature adopted terms from a cash loan initiative being readied for Oregon's November 2006 ballot. Legislative leaders agreed to pass the measure as part of a bipartisan package deal.

House Speaker Karen Minnis, R-Wood Village, called for adding a payday loan bill to the special session agenda. Two cities in her district enacted ordinances restricting payday loans, and her re-election opponent is attacking her for squelching a payday loan bill before the 2005 Legislature.

House Majority Leader Wayne Scott, R-Canby, disagreed with Minnis, a close ally."We are not passing this bill to protect people," he said. "We are passing this bill to protect ourselves."

Various banking institutions around the country have discontinued their business of payday advances. At least one has felt the effects.

Republic Bancorp Inc. posted first-quarter net income of $9.7 million, or 50 cents per Class A share, compared with $13.3 million, or 67 cents per Class A share, during the same quarter in 2005.

Steve Trager, president and CEO, said in a news release that the increase in the company's dividend "displays (the board's) confidence in the long-term outlook for the company."

Net interest income during the first quarter derived $507,000 from the payday loan business, down from $3.3 million from that business during the first quarter 2005.

The decline in net interest income also "was attributable to a decrease in Electronic Refund Check volume, an increase in the segment's cost of funding and an increase in estimated losses within the Refund Anticipation Loan portfolio," the release said.

The company did not disclose the detailed charges resulting from the estimated losses.

"While we fell short of our earnings goal for the first quarter, we experienced a great deal of operational success during our busiest time of the year," Trager said in the release.

It looks like the end of the line for payday loans in Oregon. Consumer activists are on the brink of winning a victory in this week's special session  of the state Legislature.

As one of seven states with no interest cap on such cash loans, Oregon is expected to pass a new state law limiting interest to 36 percent a year and enacting other consumer protections for borrowers. The special session was called by Gov. Ted Kulongoski to funnel more state aid to struggling school districts and to plug a $136 million budget hole in Oregon's health and human services programs.

However, House and Senate leaders decided there was enough bipartisan support surrounding the cash loan issue to add it to the agenda for this week's session. The payday loan industry has been growing rapidly in Oregon. But consumer groups say a new state law is needed to protect people from lenders who at times charge more than 500 percent interest.

The last time the Legislature met, in the regular 2005 session, a bill to limit interest rates on payday loans was approved by the Democrat-controlled Senate but died in the Republican-controlled House. That measure was shelved by a House committee chairman who was angry about insinuations by a campaign finance watchdog group that House Speaker Karen Minnis and other GOP lawmakers had been bought off with campaign contributions from the payday loan industry.

“We're delighted that the Legislature is serious about passing a real payday loan reform law,” said Patty Wentz of the Our Oregon coalition.

The coalition had planned to join with community activists, union leaders and church groups to work for passage of a ballot measure this fall to clamp a limit on interest rates charged on cash advances.

That campaign will be put on hold if the Legislature passes the payday loan bill this week, Wentz said.

It's Money Smart Week in Detroit, Mich., an annual seminar in which young and older consumers can learn more about money. The program, started by the Detroit branch of the Federal Reserve Bank of Chicago in 2004, will involve upwards of 300 classes and workshops in greater Detroit and throughout the state of Michigan.

This is the place to get your financial questions answered. If you're curious about the Medicare prescription drug changes, a four-hour expo on money issues for seniors will examine drug coverage, starting at 10 a.m. Monday at the St. Patrick Senior Center. Unwilling or unable to deal with banks? There's a seminar geared toward people without checking accounts. And that's just the beginning.

The week's events will feature sessions on car and home loan financing, personal money management, identity theft, consumer rights, the importance of credit reports, the potential dangers of instant payday loans, and much more. If things go according to plan, the subject matter may not be enthralling, but it will be essential — and draw many visitors.

New research shows that about one third of British citizens don't know where their money is going from month to month.

These findings from Alliance and Leicester highlight people's propensity to get into short-term financial difficulties, be it falling behind on home loan payments, credit card bills, rent, or living expenses. The research also indicates that 56 percent of us live paycheck to paycheck, proving that things can take a turn for the worst if unexpected costs arise.

"It's clear that many of us would like to be better savers and the best way to get into the habit is to make regular monthly payments into a separate savings account, before we even get the opportunity to blow our spare cash on a big night out or a new pair of shoes catches our eye," Alliance & Leicester's Simon Ripton said. "People could make substantial savings just by changing the way they manage their money on a monthly basis."

As a result, the payday loan industry is turned to frequently by consumers in need of urgent financial relief.

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While payday loan reform is gaining momentum is states such as Oregon, companies that specialize in these cash advances are still seeing significant profits. 

EZCorp Inc., for example, is expecting great things. The company anticipates that earnings for its second quarter of fiscal 2006, which ended March 31, will be significantly higher than previously expected.

According to EZCorp, the online payday loan company will likely have earnings of 54 cents to 56 center per share, compared with its previously announced guidance of 40 cents to 43 cents per share. The change in guidance stems from a quarter in which EZCorp realized strong growth in sales gross profit and signature loan contribution, according to the company.

The business provides pawn loans collateralized with personal property, as well as cash loans. The company also sells merchandise, primarily forfeited from pawn operations.

Gov. Jeb Bush signed a law six years ago that sharply reduced the interest rates car title loan companies (similar to payday loan firms) could charge customers in Florida. Title loans are like payday loans in that people who have bad credit and urgent debt problems put up collateral in exchange for instant cash — only in this case, it's not a postdated check, but their car title, which can be repossessed if the consumer doesn't pay.

According to the St. Petersburg Times, what was a 264 percent annual rate was slashed to 30 percent a year in 2000. But title lenders are lobbying the Florida State Legislature to return to the 264 percent limit.

Rep. Chris Smith, House Democratic leader, is pushing the higher interest rates and passed a committee vote Monday after making several changes that quieted some critics, including a $3,000 cap and lender financed credit counseling if the loans are extended for five months.

But as with payday advances, there are many people who stand opposed to such measures. Opponents say high-interest loans trap borrowers in a vicious cycle that can never be broken.

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Should you take out a payday loan? How are the fees calculated? An article from the Daily Times (the newspaper of the Eastern Shore of Delaware, Maryland and Virginia) examines the payday loan industry and breaks it down for consumers who may be curious about it.

From the basics of the payday advance business to a checklist for consumers, this column is worth taking a look at and the Times is happy to pass it along to you.

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HOW PAYDAY LOANS WORK
Let's say you need $200 cash as of tomorrow, April 18, but your payday is in two weeks (May 2). A company will agree to give you a loan by the end of the business day, so long as you write a post-dated check (or agree to an instant wire transfer, if you use a faxless payday loan agency) for the $200 plus fees, due on May 2.

The rates of interest vary, but you're probably looking at 15-20 percent of the loan amount. In this case, $35-40. For the purposes of this example, let's say you owe $40, making the total amount $240.
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Cliff Voss was short on cash and needed to make truck payments. But when he strolled down to the Advance America payday loan center in Ashland, the office was closed. He had to head to Medford.

"They’re your last resort to save your ass if you’re a working-class schmo like myself,” Voss said. “My family and my friends don’t have any money to lend, and I’m not the type of person to ask my boss for it. If you’re a person on your own, you’ve gotta do what you’ve gotta do.”

Voss is a line cook at a restaurant in Ashland and had just got back from a vacation with his girlfriend. Not receiving a fast cash advance would probably mean more debt because of late insurance and car payments.

The payday loan business is facing a growing battle in the Oregon Legislature. The voice of consumers such as Voss - actually showing support for these resources - needs to be heard. He said he has received about 10 payday loans in his life and, despite the astronomical fees, he has always paid them back on time. He has no regrets.

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On Thursday, social activists, church leaders and others urged a Senate committee to propose a tough law regulating payday lenders, who charge high interest on small loans, for the Legislature's special session next week." The Oregonian had the report.

Why wait?" asked Angela Martin, campaign manager for Our Oregon, a nonprofit progressive political group collecting signatures for a ballot initiative that would dramatically cut the amount payday payday loan lenders could charge. "It is a problem that can be solved as early as next week," she told the committee, which met in Portland.

Payday advance lenders said the initiative, or a law patterned after it, would put them out of business and force people needing short-term, small loans to turn to lenders on the Internet and across state borders, to pawn shops, to car title lenders, to illegal sources or to bouncing checks.

Such legislation "will reduce revenue in our industry by 70 percent," said Mark Thomson, representative of a national payday loan group called Community Financial Services Association of America.

A payday loan proposal

Sen. Floyd Prozanski, D-Eugene, chairman of the Senate consumer protection committee holding the hearing, said he and Debi Farr, R-Eugene, who is chairing a House committee examining the payday loan industry, are negotiating with legislative leaders on a proposed cash advance reform bill for the special session next week.

Prozanski said prospects are good that they will settle on "some reasonable regulations." Gov. Ted Kulongoski and Democratic legislative leaders say they will settle for no payday reform law in the special session that is not at least as restrictive as the initiative.

The initiative for the Nov. 7 ballot would limit fees on an initial payday loan to a $10 fee plus 36 percent annual interest, or $13, per $100. The borrower would have 31 days to repay the loan. Only two rollovers at 36 percent interest would be allowed.

State officials said in a review of 546 cash loans from 30 payday lenders last year, they found borrowers on average took out 16 loans a year.

Karry Miller, 44, an office clerk and single mother from Milwaukie, told the committee she now owes money to four payday lenders and expects her electricity and phone to be turned off.

"I'd like to stop this cycle," she said. "I want my paychecks back."