Thursday, June 22, 2006

Despite heavy lobbying from the industry in favor of maintaining consumer choice, the Beaverton, Ore., City Council appears ready to regulate area payday loan businesses.

The Oregonian reports that the council heard from owners and managers of three payday loan companies during a public hearing Monday night, each of which has been pushing hard for a proposed ordinance to be shelved.

"Let consumers make their own informed choices," urged Money Mart district manager Nina Hamman, who runs one of the company's six stores in the Portland area.

But Angela Martin of Our Oregon, a non-profit group that focuses on tax and economic fairness, told the council how lenders use payday advances to trap customers in a pattern of escalating debt that can be extremely difficult to escape.

"In its present form, payday loans don't represent helpful credit," Martin said.

Councilors will vote next month on Beaverton's proposed ordinance, which would be similar to those adopted by Portland, Gresham, Troutdale and Silverton. The local ordinances extend regulations on bad credit payday loans by allowing customers to rescind loans within 24 hours, and by requiring repayment of at least 25 percent of a loan before it is renewed.

Regulations would also allow payday loan repayment in installments if the loan is rolled over more than three times.

The Oregon Legislature approved a law in April that limits annual interest rates to 36 percent, sets a minimum term of 31 days and limits the times a loan can be rolled over to two. However, the law does not go into effect until July 2007. Part of Beaverton's motivation is to get regulations in place sooner — if the council adopts the ordinance July 10, it would go into effect 30 days later.

Only about 5 percent of customers default on their payday cash loans, said Luanne Stoltz, owner of Anyday's Payday Loans in Portland and V.P. of Community Financial Services Association of Oregon, an industry trade group. Also, in the last year, 70 percent of Stoltz's customers took out five or fewer loans, 29 percent took out 5-10 loans and 1 percent took out 10 or more.

Cities are not allowed to regulate interest rates, which, with some short term payday loans, can be as high as 520 percent.

But those numbers can be misleading, said Rick Lember, a manager with Fastbucks. Customers typically pay $20 to borrow $100 for two weeks, and payday loans aren't intended to be long-term loans. It's like comparing a taxi ride to the airport, at about $30, to an airplane flight across country for $500.

Councilor Catherine Arnold acknowledged that the city's ordinance will be largely symbolic once the state law is enacted. But there is a need to protect consumers, despite what lenders say.

"We have to ask if people are taking taxis not knowing they're in for a plane ride," Arnold said.

This entry was posted on Thursday, June 22nd, 2006 at 6:35 am and is filed under Oregon.