Payday lenders lose interest in Oregon

[Viva_La_Revolution]

Source: The Oregonian

Rate cap - At least 60 stores have shut or given up their licenses, as interest must top out at 36% under new rules Monday, July 09, 2007BILL GRAVES The Oregonian Staff
Scores of Oregon payday and car title lenders have closed their doors as a 36 percent interest rate cap and other new regulations took effect last week.

Gone are the 520 percent annual interest rates that were common among payday lenders before the Legislature recently passed new regulations. Gone, too, are many of the lenders. But among those who remain, borrowers will find their small, short-term loans cost about a third of what they cost before.

At least 60 payday loan stores have closed or surrendered their licenses since June 1, says Charles Donald, supervising examiner at the state Department of Consumer and Business Services.



Read more: http://www.oregonlive.com/metro/oregonian/index.ssf?/base/news/118394432077940.xml&coll=7

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This is a major win for the people, and hopefully will spread to the rest of the nation.

[ChoralScholar]

1. I'm sure people that get in a tough spot,

and need a couple hundred extra to make sure the rent doesn't bounce, will be grateful that this service is no longer available.

[Viva_La_Revolution]

2. last paragraph - loans are still available...

They just have to stick to the new rules that don't allow them to charge huge amounts of interest. The sharks are going out of business, the decent lenders are staying open and following the new rules.

[some guy]

18. and isn't it pathetic

that you can say a lender charging up to 36% interest is "decent."

Yes, you're right, it's much, much better than 520% - but still a long way from what a humane society would consider decent.

[acmavm]

3. Sad that people would have to depend on sharks like the 520

percenter predators, isn't it?

Lovely how many people in our society have learned to cash in on other people's tragedies and hard luck, isn't it?

[MindPilot]

5. At 520% they were certainly getting "serviced".

Given they number that shut down, it suggests they were not exactly operating in a manner that could withstand legal oversight.

[calimary]

16. Sounds more like they were getting hosed.

CRIMINY - Five HUNDRED and twenty percent??????????

Dear God.

[LostinVA]

9. They weren't being helped, they were being loan sharked

And, being thrown into a hole much bigger than any they may have dug themselves.

[Arugula Latte]

19. Credit unions are a good alternative.

Many have programs that will tide them over -- at a reasonable interest rate.

[Cooley Hurd]

4. Jesus... CAPPED at 36%??

This is legalized shylocking and predatory. I can understand that people get in a bind sometimes, but if we had sound economic policies that benefit ALL Americans, such institutions wouldn't be needed.

36% - that's incredible...:thumbsdown:

[TechBear_Seattle]

7. 520% was better?

36% is outrageous, yes, but remember that most of these loans are due in about two or three weeks. Over that span, repayment of a $500 loan would be only $507.50 (36% APR / 24 periods = 1.5% interest over half a month.) Previously, a $500 loan over the same time period would require a repayment of up to $608.35 (520% / 24 = 21.67% interest over half a month.)

The problem was that people needed these short term loans, but repaying them often required taking out a second loan to cover the interest. Many people found themselves floating a single loan for months, paying hugely inflated interest rates that dug them in deeper and deeper. These kinds of anti-usury laws are necessary to prevent predatory lending. While the cap is high, it is not so high that people must float new loans to repay existing loans.

[Cooley Hurd]

8. At one point, I thought the most interest anyone would have to pay was 25%...

...back in the day. In fact, I've never heard of "payday lenders" until very recently.:shrug:

[progressoid]

21. Yeah, remember the good old days when we had a cap below 30%

It used to be a crime to gouge the public. Now gouging is just good ole capitalism.

[Posteritatis]

30. Even 520%'s nothing for some of 'em

A couple in my neck of the woods got shut down a year or so ago; they were hiding a lot of the interest as "service charges" or whatever, on top of the usuriously-high rate they explicitly stated. The end result is that one or two of them were trying to charge de-facto interest rates in the four or five digit range.

[qwlauren35]

11. Not sure why you're surprised. Credit cards are often 27%.

In a heartbeat if you're in arrears. And those ridiculous department store credit cards are also in the high twenties.

Last, from what I recall, the interest rates that H&R Block and others who advance your tax refund are ridiculous, but when people want their money, they seem to overlook this.

People who aren't savvy with numbers are almost always the first people to get screwed over in the US.

Someday, SOMEONE WITH MAJOR VISIBILITY will point out the link between understanding math vs. getting ripped off, and a new generation will wise up.

[Quantess]

25. Oh, right. That will happen at about the same time that

people will stop blowing their paychecks on video poker, with a cigarette in one hand and a beer in the other.

[qwlauren35]

6. I agree that the profit margin was extreme...

But so is the risk.

When you lend something to a person just because they have a job THAT DAY, you really have no guarantee that you'll get the money back. When you lend money to a person with a poor credit history, you have a high likelihood that you will NOT get the money back... that's why it's a poor credit history. (As opposed to NO credit history.)

If you promise not to turn anyone away and sell them a car, you often end up reposessing that car. And reposessing a car is not necessarily profitable.

What interest rate is reasonable when the risk is that high? If either you frequently don't get your money back, or you have to pay people to hunt it down?

Honest, hardworking people who are just trying to make ends meet definitely get the short end of the stick when they are earnestly trying to stretch their dollars, and are short because of a crisis that was larger than their savings.

But those aren't the only people that PayChex and other "loan sharks" are lending to. If they aren't turning anyone away, then they are also lending money to drug users, alcoholics, high debt gamblers, and others who have a "here today, gone tomorrow" attitude about money.

To me, it is akin to insurance. Those who are insuring the high risk population will always charge higher rates, because they pay out far more often. It's DEFINTELY unfair to those who will eventually move into a lower risk category... but for those who ARE high risk and always will be, it makes a lot of sense.

[LiberalFighter]

13. They don't have to loan money to people if they don't want to either.

If they believe that recuperating the loan will be difficult they can just deny the loan.

[Gormy Cuss]

14. Oddly enough, the lenders' claim that risk is so much higher may be just hot air

From a Consumers Union fact sheet from 1999:
http://www.consumersunion.org/finance/paydayfact.htm

The industry claims its extremely high fees are necessary on account of the risk being taken and its high loss ratio. In fact, in Colorado, one of the few places in the country that collects actual data from the industry, payday lenders charge-off only 3% of the loans made from 1996-1997, while their loans had an average APR of 485.26%.(5) Conversely, California banks charged off 2.7% of credit card debt in those same years, while having an APR of 15 - 22%.(6) Thus, the payday loan industry's claim of risk and loss simply does not stand up to close scrutiny and do not justify the high rates charged.

I suspect that a close look at the data nationwide wouldn't support the risk argument either. I don't know if such data are available for the whole country.

The no holds barred heyday of this product may be over. North Carolina and Georgia have also clamped down on the practice according to the Wiki article and the feds have capped the interest rate at 36% for some military personnel.

[sodenoue]

17. bailout?

the supposed risk may be high in some instances but to these lenders (or regular commercial banks for that matter) when the entity to whom the money was loaned defaults on the payment the government bail them out; whether it is the FDIC bailing out a small S&L or the Federal Reserve bailing out a huge multinational bank, the effect is the same...You pay for the unsound lending practices through a larger bureaucracy with higher taxes and (the hidden tax) higher inflation. Either way you, as the tax-paying, upstanding citizen, pay for it. The insurance companies have mitigated their risk through favorable tax laws that apply only to insurance companies. If you do not understand how this could be profitable (and tax evasive?) for a corporation check out this link of the brief...http://www.captiveinsurancecompanies.com/op_captive_insurance_ups.html

the name of the game is bailout, and we always lose.

[Delphinus]

10. One more reason

to love Oregon. :)

[AllegroRondo]

12. They'll find ways around it

Texas capped their rates at just over 200%, which was still too low for some lenders. So the lenders would do bullshit like not qualify you for the loan unless you purchased a $25 coffe cup, or stupid things like that.

[Arugula Latte]

20. A lot of them are closing up shop already ...

Good riddance!

[depakid]

22. Yep- seen 2 of the loan sharks closed down

But seeing as how they were in damn near every mini-mall, that's no surprise and no great loss.

These folks were parasites and racketeers. One thing you don't see in the articles is about how much money they sponged off of the taxpayers by clogging up the courts to get and then try to collect on their usury judgments.

Of course, if people really "need" to pay 329% interest, they can always go to Vancouver Washington....

[Arugula Latte]

31. I volunteered at the Oregon Food Bank awhile ago and signed postcard to legislators about this issue

I remember that familiar feeling of *sigh ... I do this kind of stuff, call my reps., etc., and not much ever comes of it*

Well, this time it worked! I felt good having just a tiny, tiny piece of that victory.

I didn't realize Washington was still in the predatory lending biz ... Hope they can go after them as well.

[gratuitous]

15. And check the story

One woman quoted in the story was talking about taking out a loan so that she could go to a wedding down in L.A. Now, that's not what I would call a life-or-death emergency. I've had friends and relatives get married all over the country, and I've only gone to a couple that I had to book travel for. The rest get a nice card and maybe a gift certificate.

The worst thing, as far as the sharks are concerned, is that the woman quoted in the story concluded that maybe she was going to have to be a little more attentive to her budget and live more within her means. That sort of thinking would put these predators out of business faster than any legislation.

[Socal31]

23. The math works out people......

520% APR doesnt mean you take the loan amount and multiply by 5.2 to get the payback amount. 36% APR on a 2 week loan is VERY low, so I suspect the remaining places will only be open for a short time. If you borrow $300, at 300%+ interest, the payback amount is about $355. At this rate, most payday lenders profit at about 7%. Capping interest is a bad idea, it is going to drive out the lenders that will actually lend to these people (most dont even require a credit check.) The person who said "Just go to a credit union", is forgetting that the people who use payday advance loans are bottom-tier credit, who would not get a loan any other way.

[superconnected]

24. Bravo for Oregon! The credit card problems started in this country

when the republicans got rid of the rate cap in the late 1970's.

I believe senator kennedy fought that one tooth and nail.

Those lenders are basically the big banks(with front names like moneytree.) Banks are also who are behind most credit cards - they lease the names visa and mastercard. Basically they take everyones savings and loan it back to you at huge rates. Someone needs to cap them nationally, again.

[Yavin4]

26. If You Have to Charge Someone 520% On A Loan

then don't make the loan.

An interest rate of 36% is more than adequate to compensate for bad risks. If you make a 1,000 loans of $1000 at 36%, and 200 of those loans go bad, you will still make an 8.8% profit and lower your tax liability because you really took a net tax loss of -$112,000.

[Maeve]

27. Bring back anti-usury laws

Stop allowing folks to be bled to death legally.

[closeupready]

28. Isn't it hypocritical for the GOP to be so vocal about opposing gay marriage and yet,

when it comes to usury, which Jesus condemned, they are so silent?

[Maeve]

29. And that is different from their usual pattern, how?

He was kinda down on divorce, too, but that went by the boards in Reagan's time.

[closeupready]

36. Of course. Duh. lol

What was I thinking? :D

[TechBear_Seattle]

34. Since when have the Republicks given a rat's tail about Jesus?

All they care about is:

A) Making as much money as possible, and
B) Promoting their particular bigotries, whatever those might be.

I don't see any Jesus, despite all the lip-service.

[closeupready]

35. Well, many (if not most) of them CLAIM to be God-fearing Christians,

don't they? I'm just pointing out how disgusting they are. Surely that's allowed here, isn't it? :D

[DotGone]

32. Is it going to be enforced?

Massachusetts has similar usury laws capping the interest but these payday loan places still charge 500+ % on their loans because nobody is enforcing the laws.

[slampoet]

33. Coke dealers sometimes don't make 36%.

If you can't make it on 36% you really are a parasite.


Good! Fuck em



And kudos to Oregon for standing up to a business designed to prey on the poor and old, and specifically the poor who work.

[MiserableFailure]

37. 36% sounds like an okay cap

Anything over that would be too high imo