Reformers Take Aim at Payday Loan Rates
Byline: Jeff Wright The Register-Guard
The Rev. Tom Dodd recalls the older parishioner who was living on Social Security and became mired in debt after taking out a couple of payday loans.
"I asked if I could come over and look at the paperwork, and I couldn't believe it," says Dodd, pastor at United Lutheran Church in Eugene. "She actually had one loan annualized over 1,000 percent. It took my breath away."
Would-be reformers are taking another shot at regulating Oregon's burgeoning payday loan industry - possibly via a citizen-referred ballot measure - and a growing number of them say they're coming at the issue from a religious perspective.
"We have a strong tradition against usury - the strong taking advantage of the weak," Dodd says. "To me, it's really a central example of how power is misused, and the faith community ought to stand with those on the short end."
But industry spokesmen say they're being unfairly demonized for providing a service that meets consumer demand. They point to the low number of consumer complaints - 17 last year amid nearly 750,000 loans processed in Oregon - as evidence of their value, especially to people who might otherwise have no access to quick cash.
Oregonians "have declared that they like the product, that there's a need for the product, and that they're happy with the product," says Thom Shauklas, president of the Community Financial Services Association of Oregon, an industry trade group.
One thing everyone agrees on: The payday loan industry is exploding. There are now more than 360 payday loan stores in the state, a number that has more than doubled since 2000.
The stores made nearly $250 million in loans in 2004, the last year for which complete figures are available. The average loan amount keeps climbing each year, reaching $334 in 2004.
To get a payday loan, the consumer writes a personal check in exchange for cash. The fee for the loan is typically $15 to $20 for every $100 loaned, which works out to an annual percentage rate - how much the loan costs on a yearly basis - of about 360 percent. The APR on many credit cards, by comparison, is 18 percent.
The lender cashes the check on the day the loan is due - typically after 15 days. If the consumer can't repay the loan, he can renew or "roll over" the loan up to three times - and pay a similar fee each time.
Oregon is one of only seven states with no caps on payday loan interest rates. In Salem, the Democratic-controlled Senate last year approved a bill that would have set a 15 percent interest cap, but the bill was shelved in the GOP-controlled House.
Dodd is among a group of local church, food bank and social service leaders who began meeting on the issue last month. One idea has been to work with two sympathetic Lane County legislators, Rep. Debi Farr, R-Eugene, and Sen. Floyd Prozanski, D-Eugene, who head interim consumer committees considering more rules.
Another idea is to ask cities to impose restrictions - as a city commissioner in Portland already has proposed.
"Getting rich off the poor"
But many advocates are putting their energy behind a proposed ballot measure, Initiative No. 135, that would cap interest rates and origination fees at 36 percent annual interest, and extend the loan payback time to 31 days from 15.
Backers are awaiting approval of ballot language from the state attorney general's office before seeking voter signatures. Among the measure's chief petitioners is the Rev. Dan Bryant, pastor of First Christian Church in Eugene and president of Ecumenical Ministries of Oregon.
Bryant believes that the initiative process is the way to go. Elected officials "had their chance in the last Legislature, and they opposed it," he says. "I'm ready to try a new strategy."
Bryant contends that opposition to exorbitant interest rates is scripturally based. …