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Catholic leaders call payday loan outfits 'predatory', ask for interest rate caps

January 19, 2006 - Portland, Oregon

Catholic leaders are saying that a proliferation of little-regulated payday loan shops offering "cash now," take Oregon out of the national, and moral, mainstream.

Oregon is among a minority of states that have no cap on payday loan interest rates. There were about 300,000 such loans processed in Oregon in 1999. By 2003, the number rose to 700,000.

"Oregon's public policy lends itself to permitting predatory lending practices and to consumers being charged usurious interest rates above 500 percent," Oregon Catholic Conference director Bob Castagna told a subcommittee of the Oregon Legislature earlier this month.

The panel is studying the phenomenon and will consider possible new legislation to protect borrowers. The Oregon Legislature will convene at the start of 2007.

"The issue of Oregon's payday loan law presents a public policy issue with a moral component that the Oregon Catholic Conference suggests needs to be addressed and amended for the common good," Castagna said in testimony in Salem.

During the 2005 session of the Legislature, the Senate passed payday loan reform, but the proposal never came to a vote in the House.

Senate Bill 545 would have limited the maximum interest rate on payday loans and set a minimum 31-day loan term. The bill would have prohibited the renewal of a payday loan unless the consumer paid at least 25 percent of the principal amount of the loan plus interest on the remaining balance and prohibited fees other than interest and the fee for a dishonored check.

Rep. Jackie Dingfelder, a Northeast Portland Democrat, last year said she has seen Oregonians "trapped in a cycle of debt created by exorbitant fees." Dingfelder said the loans contribute to the state's hunger problem.

Castagna told the panel this month that Scripture and Catholic social teaching condemns usury as immoral.

In 2004, Pope John Paul called the practice "a scourge that is also a reality in our time and that has a stranglehold on many peoples' lives."

Castagna asked lawmakers to study the laws in other states.

Most states limit interest rates and fees for payday loans. Fourteen states ban the loans altogether.

"Is the common good of Oregon's residents, particularly those who are poor, advanced by providing fewer consumer protections on payday loans than exist in other states, particularly Washington and California?" Castagna asked.

News Source

Catholic Sentinel, Ed Langlois, Staff Writer

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