Monday, August 7, 2006

When Oregon voters head to the polls this fall, they’ll have 13 ballot initiatives to consider. Payday loan regulations? Not one of them.

That's because a coalition of groups called Our Oregon tried to gather enough petitions to put the issue on the ballot, but never got the chance.

Republican lawmakers caught wind of the plan, became scared of its potential political impact, and passed the proposed referendum word-for-word in the state House themselves.

"We should come clean [about] what we’re really doing today. We’re not passing the bill to protect people; we’re passing the bill to protect ourselves," State House Majority Leader Wayne Scott said.

As we all know, payday loans are short-term, high-interest loans in which borrowers receive an immediate cash payment and write a post-dated check that can be cashed once they receive a paycheck.

The interest rates are far higher than loans through commercial banks, up to 500 percent or higher in some cases. Moreover, these personal loans can be rolled over for additional fees, which means customers end up paying more interest than the principal they’d originally borrowed.

In the last few years, the industry has exploded. From 2000 to 2003, the number of faxless payday loan companies has more than doubled, and the industry’s sales have quadrupled to $40 billion.

In response, states from Florida to Arkansas to Illinois have been cracking down on payday lenders, imposing strict disclosure regulations, limits on the number of rollovers and interest caps. Until recently, Oregon was one of only seven states with no such caps, which served as a magnet for the industry, with companies flocking in.

But as no faxing payday loans exploded, so too did horror stories about cyclical debt and eye-popping interest rates. Portland resident Maryann Olson, 58, didn’t have the $150 she needed to buy orthopedic shoes, so she took out a payday loan. Several months later, she owed $1,900 to six different lenders.

After housing and medical costs, she had so little money left over to pay down her debt, she says she was going out to other payday cash loan companies, trying to rob from Peter to pay Paul. Social service agencies around the state began noticing more and more of their clients in situations like Olson’s.

Beginning in 2004, a coalition of faith-based social service agencies, along with Oregon State PIRG and the Oregon Food Bank, started pushing in the state legislature for bills that would have limited interest rates and rollovers. Thanks in large part to the hundreds of thousands of dollars the industry spends on lobbying, the opposition was stiff.

When Our Oregon started plotting its election-year strategy last fall, however, everything changed in a hurry.

"Most of the major political groups hadn’t really been tracking the payday lending issue," says Our Oregon Strategic Consultant Kevin Looper. "But when we started Our Oregon, we wanted two things out of it — permanent coalition building capacity, and to fill in the gap we saw strategically, which was all around advancing basic economic fairness."

The coalition commissioned a poll.

"We got really great, clean-ballot language that said we’ll limit the interest rates on payday loans. We polled on it, and it literally polled off the charts. Our pollster said, ‘I never see polls like this.’ It’s just unbelievably rare to find an issue that’s 70-30, and you win every one of the demographic groups,” Looper said.

Republican lawmakers were caught between a rock and a hard place, as the registered voters in their districts saw this good legislation.

Lawmakers then tried to thread the needle by voting for the bill during the special session, but attached a provision delaying the law’s implementation for 15 months, hoping to take the issue off the table for the elections and then gut the reform next year. They even said as much.

“I’m rising in support of this [bill]. There’s no question about it. But this bill is not going to solve the problem. We need to come back and look at this bill again, whether it’s going to work or not,” said Republican State Sen. John Lim.

Translation: I’m voting for it before I vote against it.

Luanne Stoltz, V.P. of the Oregon Community Financial Services Association and proprietor of Anydays Payday Loan in Oregon, says the regulations are well-intentioned, but counterproductive. Stoltz says her customers are grateful for the service she provides. She compares it to buying a latte at Starbucks, in that you pay more than you should for the convenience.

But if the service is so popular, why did lawmakers nearly fall over themselves to pass the interest cap?

"We’re a society that loves to have victims. There are a very small percentage of our customers who frankly abuse the product. I feel bad for them when this happens, but they are not the ones who suffer: I’m the one without the money! They chose to take out more faxless payday loans than they could pay, and now they’re in a pickle," Stoltz said. "They make a great story, a sad sob story. It’s the picture we love in America — the poor down-and-out person, we have to help them, and the bad person who loaned them the money is the reason they’re there.”

So far, rhetoric like this hasn’t proven particularly effective.

Since its victory in April, Our Oregon has pushed forward local payday advance lending regulations in eight municipalities, including conservative cities like Gresham and Oregon City. In recent years, conservatives have utilized wedge issues to particular effect at the state level. For instance, in the 2004 presidential race, Karl Rove engineered a series of anti-gay marriage ballot initiatives in key states designed to draw conservatives to the polls and attack the progressive base.

But while voters might be to the right of the Democratic Party on social issues, they are also, by and large, to the left of the Republican Party on economic issues. In other words, progressives have the ability to leverage their own wedge issue: basic economic fairness.

“I have a data guy who’s gone through the ballot measure results from every part of [Oregon] by precinct and house district. Going back 10 years, every time they move regressive social issues, we lose some share of base, and every time we move economic populist stuff, like minimum wage, we pick up ground," Looper said. "Take the speaker’s district: We lost the gay marriage issue by more votes than we lost even the presidential race in her district. But we won minimum wage by much more than they won their legislative district,” he added. “Politics is about winning. When you convince politicians that you can make ‘em lose, even the regressive ones tend to pay attention.”

This entry was posted on Monday, August 7th, 2006 at 8:51 am and is filed under Oregon.