Oregon’s payday lenders all but gone
Quick cash – Consumer advocates claim a victory but fear residents will turn to such lenders on the Web
Sunday, July 06, 2008

The Oregonian Staff
Oregon’s payday lending industry shrank dramatically in the year since the state cracked down on the short-term lenders’ soaring interest rates.

Three out of four Oregon payday lending stores have closed, and most stores still operating depend on check cashing and other money services to stay in business.

“The politicians and the so-called consumer advocates succeeded in eradicating the payday loan business in Oregon for the most part,” said Steve Hanson, president of Oak Brook Financial Corp. Oak Brook, the largest short-term lender still surviving in the state, has 24 stores that cash checks and make payday loans.

At its peak in 2005, the payday loan industry had 360 stores in Oregon, about the same as the number of Starbucks and 7-Eleven stores in the state combined.

“It was a sign that maybe we had a problem if (payday stores) were able to survive when they were that prolific,” said David Tatman, administrator for the state Division of Finance and Corporate Securities, which licenses the lenders.

The number of stores dropped to 329 by the time new regulations went into effect July 1, 2007, and have since dropped to 81. Car title lenders, which also made small, high-interest loans using car titles as collateral, have all but disappeared in Oregon.

Hanson says the decline cost about 800 jobs in the payday loan industry and leaves Oregonians with fewer options when they get in a pinch and need a quick small loan to repair a car, prevent a utility shutoff or handle some other immediate need.
Advocates pleased
But leaders and activists who fought to regulate payday and car title lenders say the industry’s decline has been good for Oregon borrowers.

“It is fantastic for Oregon,” said Angela Martin, director of economic fairness for Our Oregon, a nonprofit “consumer advocacy group” in Portland. “Especially as we are going into economic hard times, that is exactly when consumers need protection from the predatory lenders.”

Martin and other advocates, church and civic leaders and legislators began pushing for regulations on the lenders because some borrowers were getting trapped in debt.

Payday lenders commonly charged $20 per $100 for a two-week loan and charged another $20 if the borrower chose to extend or roll over the loan for another two weeks. After three rollovers, borrowers owed $80 for every $100 they borrowed. Some would go to a second lender to pay the first and a third to pay the second and so on in a spiral of escalating debt.

In 2006, the Legislature passed a bill to cap interest rates on payday loans at 36 percent. Then in 2007, it extended the 36 percent interest cap to car title lenders and Internet lenders. And a sweeping bill sponsored by House Speaker Jeff Merkley, D-Portland, brought all other consumer loans of $50,000 or less under the limit.

Under Oregon’s new laws, payday and car title lenders can charge an origination fee of $10 per $100 loaned, with a $30 maximum. Loans must be for at least 31 days. Lenders can charge 36 percent annual interest, or about $3 per $100 per month in addition to the origination fee. That results in a total of $13 per $100, which is an annual interest rate of about 154 percent — about one-third of what borrowers were paying before the new law.

Hanson of Oak Brook Financial said his company closed 17 of its 41 Oregon payday lending stores, and the survivors are primarily check cashing businesses with ancillary payday loans.
Stores survive on mix
State officials say they know of no remaining stores that offer only payday or car title loans. Check ‘n Go Inc., a payday lender based in Mason, Ohio, closed its 21 Oregon stores. Advance America, Cash Advance Centers Inc., based in Spartanburg, S.C., the nation’s largest payday lender, also shut its 45 Oregon stores.

Northwestern Title Co., a car-title company based near Atlanta, challenged the constitutionality of Oregon’s interest cap on consumer loans in court. But it did not prevail and has stopped making loans in Oregon. Six of its 17 Oregon stores remain open only to liquidate the company’s remaining assets and to collect unpaid loans, said Ken Wayco, president of the company. It operates 350 stores in 23 states.

“The sad part is we have 25 people a day coming into our stores begging to borrow from us,” he said, “but we can’t lend to them.”

Payday lenders made 937,000 small, short-term loans worth $334 million in 2006, charging annual interest rates that averaged 487 percent.

Based on reports from 68 percent of the stores in the state so far, it appears the total number of loans dropped to about 700,000 in 2007, officials said. That number will probably drop more in 2008 with the regulations in effect for the full year, they said.
Tests in other states
Payday lenders face challenges in other states, too. Last month, Ohio Gov. Ted Strickland signed a bill capping payday lending rates at 28 percent, which lenders called a death warrant. In Arizona, payday lenders are collecting signatures to put an initiative on the November ballot that would bar a state law from shutting down the industry in two years.

In Oregon, officials now worry most about residents going into debt with payday lenders on the Internet, Tatman said.

Internet lenders selling to Oregonians are required by law to register with the state and abide by its regulations, but many do not.

It is difficult for the state to control Internet payday lenders who charge triple-digit interest rates, Tatman said. “If we could just get our arms around the Internet better to make sure people don’t jump out of the fire and into the frying pan.”

Bill Graves: 503-221-8549 [email protected]

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