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Payday loan limits are long past due

November 22, 2006 - Eugene, Oregon

The apologists for the payday and car-title lenders that exploit the poorest, most vulnerable Oregonians have long insisted there's no real problem with lenders charging more than 500 percent interest on short-term loans.

Look, they say: Few borrowers have filed formal complaints with the state. What's the problem?

Well, it's never made any sense to measure the fairness or the morality of payday loans by how few poor people know to go to the Oregon Department of Consumer and Business Services to formally complain about being ripped off.

Thankfully there's now better information before Oregon policymakers. The state consumer services agency has issued a report on payday and car-title loans showing that last year alone more than 100 borrowers lost their cars, 3,400 were sued and 104,000 had problems repaying loans.

You can see why: Payday lenders charged annual rates of interest that averaged 528 percent and topped out at an outrageous 2,551 percent, according to the report.

That's obscene. This exploitation is still going on, too, because the Legislature chose not to put into immediate effect a law it approved April capping payday loan rates at 36 percent interest. That law doesn't take effect until July 2007 -- a delayed starting date designed to give payday lenders another crack at weakening the law in the next Legislature.

That won't happen now. The payday and car-title loan industries were among the biggest losers in the recent election. House Republicans, including Majority Leader Wayne Scott, R-Canby, who have defended the payday loan industry in Salem, no longer have partisan control of the Oregon House. They won't be in a position to weaken the law when lawmakers reconvene in January.

Instead, incoming speaker of the House, Rep. Jeff Merkley, D-Portland, is determined to close loopholes in lending laws and protect the state's most vulnerable consumers. He's sympathetic to arguments made by church leaders, Oregon Food Bank and AARP for an across-the-board cap on all lenders in Oregon, including car-title lenders, of 36 percent interest.

Some defenders of payday and car-title lenders say they are simply providing a needed service to the poor. There's no denying the large and growing demand for payday and car-title loans. Last year, according to the new report, payday lenders made 840,748 loans, a huge increase from the 285,000 loans made in 1999.

Yet payday and car-title lenders operate and serve tens of thousands of low-income borrowers in other states that have put reasonable limits on interest rates and penalty charges. Poor people in these states still have broad access to short-term loans. They just can't be so baldly exploited by lenders.

Oregon, to its shame, is one of the last places in this country to allow a lender to legally charge a poor, desperate borrower 2,551 percent interest.

News Source

The Oregonian, Editorial

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