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Oregon: Report sparks interest in tightening payday loan rules

November 21, 2006 - Portland, Oregon

More than 100 Oregonians lost their cars, and 104,000 had problems repaying after borrowing money from payday and car title lenders last year, a state agency reports.

The report said payday lenders charged annual rates of interest that averaged 528 percent and soared as high as 2,551 percent.

The Oregon Department of Consumer and Business Services released figures for 2005 showing payday lenders made 840,748 loans--a 15 percent increase over the previous year. The loans were worth more than $278 million.

The Legislature passed a law to cap interest at 36 percent, beginning in July. The cap will not apply to car title lenders, who make short-term loans using car titles rather than future paychecks as collateral.

Car title lenders made 17,801 loans in Oregon last year and repossessed 114 cars.

Since the Legislature's crackdown, a fourth of the payday lenders have applied for conventional consumer licenses, which are not affected by the interest rate cap and enable lenders to restructure payday loans into small installment loans and continue charging high interest.

The state agency is proposing to require loans from conventional lenders to exceed six months and be approved by experienced underwriters.

The department is proposing legislation to extend the 36 percent cap to car title loans and to limit check-cashing fees, also charged by many payday lenders, said David Tatman, administrator for the Division of Finance and Corporate Securities.

A coalition that includes churches, the Oregon Food Bank and AARP will push for a cap of 36 percent on all lenders in Oregon in the 2007 Legislature, said Angela Martin, economic fairness director for Our Oregon, a progressive nonprofit group in Portland.

The new speaker of the House, Rep. Jeff Merkley of Portland, said he may ask a committee to consider further regulations, possibly an across-the-board cap on interest rates.

The government is unfairly targeting payday lenders, said Luanne Stoltz, a payday lender and vice president of the Consumer Financial Services Association. "We think consumers should be allowed to make decisions about what loans are right for them, and the market should set the rate," she said. Most customers pay back their loans without problems, she said.

News Source

The Oregonian, AP Staff Writer

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