Loopholes in Payday Loan, Cash Advance Regulations Must be Closed
By J.J. CameronPayday Loan Writer
The Oregonian has many views on payday loans. We've covered a few of them already, but the latest from the newspaper deals with certain loopholes in recent cash advance legislation.
This spring, the Oregon Legislature cracked down on payday loan stores that drag low-income families deeper into debt. The practice of charging steep fees was outlawed, along with annual interest rates that exceed 500 percent, on short-term loans.
The intent was to keep the payday loan industry from taking unfair advantage of customers' desperation or ignorance. And it was greatly appreciated, an important public service was accomplished. However, legislatures left a big loophole in their legislation, as The Oregonian's Bill Graves reported last Sunday. The new law, which takes effect next July, applies only to payday cash advance lenders.
It doesn't cover conventional lenders, who are licensed to make longer-term loans that are paid back in installments. It also doesn't cover car-title lenders.
In response, the cash loan industry is taking advantage. About 20 percent of Oregon's 363 payday loan stores have already upgraded to conventional licenses, for example. This will allow lenders to skirt the new rules and continue charging extortive interest rates.
The state should respond in two ways:
- First, if legally possible, state regulators should extend the no faxing payday loan reform law to cover car-title loans. This would limit the number of low-income families who end up losing their car or paying its value several times over in interest.
- Second, the state Legislature should require conventional lenders to live under the same rules as payday loan lenders: No fees greater than $10 per $100 on an original loan, and no annual interest rates higher than 36 percent.
Oregon can't solve the problem of predatory payday advance lending through legislation alone. These lenders are, in many ways, a symptom of deeper problems: Too many families can't make ends meet. As long as Oregon fails in these areas, it will continue to have the highest number of quick payday advance stores, per capita, on the West Coast.
But in the short term, Oregon can at least effectively regulate this dangerous cash advance industry. It's one small way to help low-income people avoid bankruptcy.
