Minnis and Payday Loan Companies

Jeff Alworth

Yesterday, Karen Minnis issued a statement in favor of legislation limiting the amount of interest payday loan companies can charge clients.  This is a curious change: for years Minnis, whose backers include those very same loan companies she wishes to regulate, has tried to kill bipartisan legislation that would do exactly that. 

Minnis said her goal was "to reach a consensus with my colleagues in the Senate on a compromise that would provide uniform protections for our consumers while still making loans available to the thousands of Oregonians who use them."

The payday loan companies in question are those dubious businesses that prey on the poor and disenfranchized, charging outrageous fees for advances on paychecks.  They commonly charge $20 for every $100 for a two-week loan (over 500% interest), but they can earn even more. Here's a nice primer from a "payday loan industry resource:"

If you have a 5 ft. by 5 ft. area available, you can turn it into additional income....

A typical 8 day paycheck advance extended to your client will yield an annual percentage rate on your money of 805%!. Starting costs vary tremendously and are determined by your goals. A new store might require leases, first and last plus a deposit, signage, licenses, phones, etc. Adding a payday advance loan opportunity to an existing business requires hardly more than workong capital, business cards, flyers, advertising, forms, etc. Payday Advance Loan working capitol requirements are determined by you! We have heard of new deferred deposit operators who began with less than $2500.

Clearly, these are upstanding operations; why would anyone but a crazy liberal wish to regulate fly-by-night operations that feed on the poor and earn 805% interest? 

Karen Minnis has defended this industry in the past, so why would she offer to work with reformers now?  Because change is afoot, with or without her, and she figures she can actually protect her industry from the worst regulations.  Anyway that's what Jeff Merkley, the House Democratic Leader, apparently believes:

“Speaker Minnis’s vague call for special session action to regulate the payday lending industry is meaningless.  In fact, it’s a thinly-veiled effort, on behalf the payday loan industry that has supported her, to prevent real reform currently being considered by local communities.”

“Faced with a growing number of city ordinances and a likely ballot initiative, the Speaker has chosen to preempt local governments and distract reformers from going to the ballot.”

The Oregon House Democrats blog has more information about Karen Minnis's history with payday loan reform legislation, her links to the industry, and efforts Dems would make for real reform.

Comments

  • Sid Leader (unverified)
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    Time for some math:

    Paul Allen needs $100,000,000 yesterday. Or so he begs.

    If he walks into one of those Quickie Loan places on Powell, he can get the cash for only 500 percent annual interest.

    So the $100,000,000 will only cost him another $500,000,000 in interest for a total of $600,000,000.

    Divide that by 12 months and you get, well, my calculator doesn't go into "GOP lala land", but I'm guessing about $50,000,000 a month.

    So, Paul, need a ride?

  • Marvinlee (unverified)
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    If Blazer fans value the team enough to pay for what they want via higher ticket prices, more power to them. If they value the team so little that they want non-ticket buyers to pay, then the Blazers are dispensable.

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    If Minnis had really cared about payday loan reform, she would have pushed for the bill to go to a vote in the last session. Instead, Republicans kept the bill from coming to a vote because they were insulted at the insinuation that the tens of thousands of dollars from payday loan companies would somehow sway their vote.

    This is an issue that highly affects Minnis' district, and its sister district, H.D. 50. This is why both Gresham and Troutdale are looking at their own payday loan regulations.

    This comes from Minnis because...

    1) she's running scared

    2) she knows that the voters will probably pass the payday loan reform measure that's about to go out for signatures, and she doesn't want to see those regulations go into effect

    This is just a political game, and I'm glad to see Merkley calling her on it.

    And Merkley isn't involved in this just because he's the house minority leader. He also happens to have a district that has some of the highest concentrations of payday loan businesses in the metro area. He spoke at a sub-committee meeting last month on this topic-- and did a great job.

  • Patty (unverified)
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    The Oregon Food Bank is looking for stories from people who are typical of the payday loan experience, that is getting trapped by high interest charges and big fees. They have a hotline set up: (800) 777-7427, X230.

    Also, Our Oregon sent out a release today in response to Minnis's statements. The bottom line is that people cannot wait for real reform while she plays politics, the advocacy community is moving forward with the ballot measure and we invite the speaker to endorse the Payday Loan Reform Act.

    Here's the link to the measure: Our Oregon

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    Every time I hear/read the name "Karen Minnis", I get that Wicked-Witch-Of-The-West theme song in my head from the Wizard of Oz. Bleh.

    Patty's right. Minnis is playing politics with the issue. If she really gave a rat's fat patoot about it she wouldn't have blocked the bipartisan efforts on it during the previous session.

    I hope she and her broomstick are sent packing in November. Ugh.

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    Jeff,

    Good post. I'd like to point out one small two word misstatement. You wrote:

    The Oregon House Democrats blog has more information about Karen Minnis's history with payday loan reform legislation, her links to the industry, and efforts Dems would make for real reform.

    Its not the efforts Democrats "would make" its the efforts Democrats "made". I remind folks that the Senate Dems passed SB 545 on a PARTY LINE VOTE. The House R's killed SB 545 on a PARTY LINE VOTE. I read on blueoregon.com all the time how Democrats don't fight for what they believe in or are just the same as Republicans. This is one of the best examples that illustrate the true difference between the two parties. On one side are the Democrats standing up for consumers and vulnerable working families. On the other side are Karen Minnis and the Republicans, their corporate contributors and greed.

  • Chris Andersen (unverified)
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    Another factor in this is that Minnis is getting hammered in her home district by Brading and others specifically over this issue. By coming out in favor of some watered-down version of a state-level bill (that just so happens to overrule more significant local efforts to address this problem) she can then go to her constituents and claim that she did do something to resolve the problem. And if she gets resistance on this she can then say she tried to do something but couldn't get it done, because of those damn Democrats!

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    Carla--

    I've always gotten the picture of the red queen from Disney's Alice in Wonderland in my mind when I hear Minnis' name.

  • james mattiace (unverified)
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    For fairness sake, Senator Margaret Carter(D) was the 13th Senator to vote no on SB 545. Maybe I am talking out of school here, but she really chose the wrong time to cross party lines.

    Payday loans are up there with corporate citizenship as fundamental evils in our system. I'd add video poker, meth, and child abuse/domestic violence to round out the top 5.

    I think we might have just found our "moral values" issues. In short, "the predators amongst us".

    I'd also like to see a study that shows how many of these payday loan places are owned by the very banks that reject people for secured short term loans at 7 or 9%.

    James

  • df (unverified)
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    I am unconvinced that there is any real justification for government intervention here. Yes, payday loan places are a total rip-off, but don’t you think people who patronize them realize this? I am sure they do, yet they keep going, why? Well, obviously they are driven there by other market/societal failures. By simply forcing them to lower their rates, you will drive many out of business, something people who don’t use them will cheer, but this will, most likely, leave their customers more desperate than before. The real reason they exist has probably something to do with the lack of good alternatives like the ability to bank in a main stream bank probably to do with lack of stable addresses, proper identification, etc. This is where government could intervene – for example require that businesses provide employees with a way to acquire cash on payday.

    To give you the economists view: if payday loan companies charge 805% interest, it is probably because there is very high risk, otherwise competition should drive this down. There is no monopoly power, for as you quote shows, any clown with a few bucks can start a payday loan operation, so there is no reason to expect that this interest rate is not a ‘fair’ market rate. In fact, without payday loan stores, these people will probably be pushed on to the black market. Again, I think the problem lies not in the payday loan stores themselves, but the banking system that excludes a large segment of the most vulnerable population – this is where govt. should intervene.

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    DF, you make a good point, and if Minnis would like to offer something to make bank accounts more available to the poor and disenfranchized, I'd lay off. But this post is less about the issue of payday loans than about Karen Minnis's effort to take credit as a populist reformer, when in fact it appears that she's exactly the opposite--she's protecting the very entities who have funded her campaigns so well. If she has the political courage to stand up and fight for them honestly, argue as you did that they're respectable businesses and that this is bad law, I'll quit calling her a double-dealer. But she wants it both ways, as she has with so much else.

  • k. (unverified)
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    I'm not with many of you who believe that corporatations are all evil. Are there some that are evil? Yes. Are some led by horrid individuals? Yes. I'm not about to paint them all with a broad brush. There's a lot of companies that do a lot of good things too.

    Payday loan companies, though, are completely insidious. Do they provide a service? Yes. Just as loan sharks do. The only difference is that they don't offer to break your legs if you don't pay back the loan and they are legal. I understand the argument that people using these companies have poor or no credit so the risks are high in order to loan to them but 500% interest rates are in no way reasonable. One can obtain a credit card with poor credit with a Substantially lower interest rate and credit card companies are still profiting nicely so the risk/reward argument simply doesn't fly with me. At least credit card companies supply a wide variety of career options (jobs) & contribute to various charitable causes. Payday loan companies have an owner and likely a few minimum wage employees at most. And I've yet to see one sponsor a non-profit endeavor.

    The other commonly heard argument is that these people have no other place to go. Well, yes. That's true. Banks and other legitimate lending institutions won't lend to them. They may have tapped out advances on their paychecks, assuming they can get them. Friends may be in the same financial position they are. Opportunity doesn't make it right. That's like saying crime is ok as long as you know you won't get caught. I wonder if these payday loan operators would agree with that if their home was robbed when no one was home and the culprit got away; after all, maybe they are using the goods to pay for their interest on their payday loan? Legal or not caught does not make something right.

    It baffles me that in a state as progressive as Oregon, and with as many working poor, has fallen so far behind on this issue. Other states have restrictions. We don't even have loose restrictions; we have none. I'd bet that many of these payday loan companies are owned by out of state interests, which means the profits are being taken out of state (likely to a state that has restrictions).

    Isn't Minnis supposed to be religious? Where are her religious mores when it comes to financially raping the down and out? Somehow I don't think Jesus would be ok with that.

  • k. (unverified)
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    I'd like to address this comment by df "Yes, payday loan places are a total rip-off, but don’t you think people who patronize them realize this?"

    Some of them probably do, that's true but I think you'd be amazed at how many really don't.

    Remember, df, you're coming from an educated position. You probably know how to balance your checkbook, shop prudently and within your means, etc.

    My contact, through various non-profits, with some of these individuals indicates that many of them do NOT understand the whole they are digging themselves.

    I can even look at some of my own, college-educated friends and see this. Years ago, a friend of mine was trying to save money to purchase a home. I was helping him create a budget to do so. During this process, he buys a top-of-the-line stereo system. This is someone that already had substantial credit card debt and he really did want to save money. I asked him why incredulously, and he told me that it wasn't real money because they offered him 0-down and no interest for 3 months. No mention of the interest that would smack him in the face at the end of those 3 months. I mentioned it to him along with the fact that between his current debt obligations (minimums) and his salary that he wouldn't be able to pay even a small portion of his new loan before the 3 months was through. He still didn't get it. And this is a college-educated (with good grades) man.

    If my friend doesn't know and can't understand the basics of loans and interest, how is someone that isn't educated and has never had anyone teach them either by sitting down with them or by modeling behavior?

  • Jesse O (unverified)
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    1. Using annual percentage rates for payday loans is misleading, as the vast majority of these loans are paid off within a month

    2. If the problem is real, the market should create solutions. There's enough money to be made, banks just have to figure it out. Lending agencies are offering solutions to problems other businesses aren't addressing, and are providing a true service. yes, it's a dangerous service with a downside, but it usually works.

    3. Yes, the market is imperfect, because consumers don't always understand what's going on.

  • Donald Duch (unverified)
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    I have actually spoken with a lot of people who taken out these kinds of loans and they do understand what they are doing but they really don't have a choice. They have either asked family already or their family is just as poor or they are on disability or retired on a fixed income and they need money because of medication or just to pay bills. A lot of them don't make good choices in life but sometimes, it's out of their control and they just need help. They've gone to social services and churches but they need money to buy clothes for their kids or groceries and they don't have good credit, or any credit to speak of and banks won't lend them $200 for the month. You can regulate these all you want but when they get regulated to the point that they are not profitable, then there won't be any choice but criminal activities to get money. This is not a black and white issue people...

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    Not so, Jesse O. The Annual Percentage Rate (APR) is a tool that is designed to help consumers compare the true cost of loans. Basically, it's the interest plus fees; it has nothing to do with when the loan is paid back.

  • iggi (unverified)
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    "You probably know how to balance your checkbook, shop prudently and within your means, etc."

    christ, i still can't do any of this...and i'm not even as stupid as i look.

  • Brandon Drury (unverified)
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    If my friend doesn't know and can't understand the basics of loans and interest, how is someone that isn't educated and has never had anyone teach them either by sitting down with them or by modeling behavior?

    So what are you trying to say? Are you suggesting that laws should be put in place to block educated people from buying stereos? It seams like you have made the point that people regardless of background or education make ridiculous decisions with their money.

    For a country to control what we purchase with our own hard earned money is step too close to socialism for me. I've studied enough about Nazi Germany to understand that the responsibility associated with freedome is worth the extra work.

    Do you liberals think that poor people are stupid? I don't think so. I think some people are bad with their money. It's a shame. Maybe the solution is improved financial education in schools. I don't know. However, the post above this one makes it clear that people are going to make bad decisions no matter what. If you really want the government to pass a law to prevent EVERY instance of bad financial practices, we won't have any freedoms left.

    I'm insulted by the liberals who think they know what's best for another person.

    The Solution To me the best solution for the payday loan issue is to force payday loan stores to post their prices just like you see at a fast food joint. This way it's 100% clear for the person using the payday loan of what they are getting into. After that, it's their own responsibilty.

    Isn't Minnis supposed to be religious? Where are her religious mores when it comes to financially raping the down and out? Somehow I don't think Jesus would be ok with that.

    You have to be kidding me. If we want to use that sort of logic, I can call you out for treason. The United States was founded on the idea that men could rule themselves without a tyrant from miles away telling them what they can and can't do. Everytime you liberals push for more and more laws, you are pushing away from the ideas of freedom that this country was founded on.

    Brandon Drury http://www.pdadvance.com

  • brett (unverified)
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    These loans are the only loans available to this population. The people taking out these loans are adults who are presumably capable of understanding the consequences of their actions, and if they are not, it is not the job of the government to force them to be responsible. No call for government intervention here at all.

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    .

    Actually, there is very little risk in giving out payday loans. These loans have some of the highest repayment numbers in the industry. If you don't pay, they take you to court and have it removed from your paycheck.

    There's no reason for these places to charge up to 700% for loans that banks and credit unions can only charge up to 18% for. I realize that payday loans don't have all the other activity to make money from (home loans, checking accounts, etc.), which is why most support APR of 30-50% and caps on fees.

    Many of these loans are not paid off within the month-- it only appears that way. In actuality, they are paid for by a new loan the very next day.

    The people getting payday loans often need them for an important medicine, to keep from getting evicted, stop the elctricity from being turned off, etc. They're not getting these loans to go out and be frivilous-- they're paying for the basic necessities.

    These are people who live paycheck to paycheck. All it takes is an illness that keeps them from working, an ill child, etc. and they miss enough work to not be able to meet their bills.

    They don't know all the evils of payday loans. They know the fees seem a bit high, but what are they going to do if there are no other options? What are they going to do if they get evicted? Or if their electricity is turned off-- food in the fridge will go bad, no hot water, no heat during the winter, etc. Or if they badly need a medicine, or else they'll be in pain, end up back in the hospital, etc.? Or buy food so there is something to eat? Food stamps don't go far, even if you buy the absolute cheapest food available. Ours gave usless than $30/week for a family of 3.

    Minnis is just trying to protect her campaign contributors' businesses, as opposed to protecting her constituents.

  • Jeremiah L (unverified)
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    Not about payday loans, I just hate when people leave their italics on.

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    Thanks. I'd tried above to close it, but apprently it didn't work. Now I see how to do it.

  • Madam Hatter (unverified)
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    I'm a little puzzled by Jeff's statement that Minnis is "in favor of legislation limiting the amount of interest payday loan companies can charge clients." The Oregonian article that is linked, which is the only other info I've seen on this, doesn't actually say she's in favor of limiting interest rates. It just says, as Jeff quoted:

    "Minnis said her goal was "to reach a consensus with my colleagues in the Senate on a compromise that would provide uniform protections for our consumers while still making loans available to the thousands of Oregonians who use them.""

    <h2>That's a pretty broad and obscure statement there, and I thought it notable that she DIDN'T mention anything about interest rates. Is that the only type of "reform" the legislature is able to make (and so interest rates are assumed)? Just a question cuz I don't really know.</h2>

    As far as the payday lenders go - they're greedy loan sharks preying on the misfortune of many. If you believe differently, please answer this: Why has this even become an issue now?

    People have not just gotten stupider, or more frivolous with their money, or more desperate.

    But, MORE people are desperate. Without getting into a huge debate about the economy, you only have to look at the stats that show the financial health and security of a HUGE and growing portion of the population is rapidly declining. Median income is down for all but the top income levels and the savings rate is -I believe - in the negative for the first time for most of the middle class. Whatever - the allegedly booming economy is not trickling down to a large portion of the public.

    So why the huge increase in these bottom feeders now? The traditional banking services have always been out of reach for anyone who's hopelessly in debt, has bad or no credit, and has low and/or unstable income. It's better now, but it used to take a $200 minimum balance just to open and keep a checking account. A loan or a credit card? Forget about it.

    I think it's really perverse to say that the market is there, so that justifies exploiting it so. These are generally hard-working (can't get a "payday" loan without a job, after all), honest people in a jam who have either exhausted all other available resources or don't have any other to call upon. So let's make it harder for them to stay afloat and remain honest, tax-paying citizens, huh? Crazy.

    Maybe someone should do a study (which Oregon seems so adept at doing - and then ignoring) on how many people filing bankruptcy and applying for social services were prior payday loan customers. These folks probably would have gone down with or without the payday loans - they just prolonged the agony a bit, I'm sure. But why should these bloodsuckers get to drain out the last drops?

    Either way, it'd be interesting to find out and might give a clearer picture to take to Salem.

    I really think someone should undertake a study of the economic costs to the system of economic insecurity and poverty in general. We've had umpteen studies on the cost of meth, the cost of the PPB disability fund, the cost of this, that and the other thing. They help the public understand in "real terms" (gotta hit 'em in the ol' pocketbook, ya know) the cost of things.

    So you want to reduce foster kids, improve education, up the tax base, allieviate overcrowded jails, fight meth, reform the health system? Well, duh. Reduce poverty. Reduce need. Reduce the amount of people needing help to just get by.

    Call me a socialist but there's no reason anyone in this country should not have the basics if they want it: a warm, safe roof over their heads; sufficient, quality food; comprehensive medical care; the means to make a living wage if they're capable. That's really not so much to ask, is it?

    I never used to think it was otherwise growing up in my solidly middle-class home in the 60's. I think many still don't - or it isn't real to them. The illusion that persists that only the irresponsible or undeserving are poor - or if you prefer, economically insecure - is going to haunt the Dems, I think. THAT'S a platform I think they could use to oust the Repugs this fall. But who listens to those without money?

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    But who listens to those without money?

    You hit the nail on the head. Nobody cares about the poor, because they have no money to give to campaigns and are often times less likely to vote.

    People have this idea that the poor choose to be that way, or that they're just lazy. This is far from bring true.

    Yes, many don't have college degrees. A good number of them do have years of college, just not the degree. Many don't have the ability to go to college. It does cost money-- and the price is constantly going up. Then there's the need for childcare while in class (and hopefully some for some homework/study time). And then there's trying to fit school and work into your schedule-- especially when you're working two jobs.

    Some are poor because of health reasons. There are a good number of people who can't hold a steady job because of health reasons, but can't get disability. My sister has terrible endometriosis that often keeps her from working. For over a year I had terrible problems with my gallbladder and liver that ended up meaning surgery. But do you have any idea how hard it is to get any kind of financial help when you're in that situation? They tell you that the symptoms don't keep you from working a job. However, if the symptoms keep you home a few days a week (and you never know which days those will be), how can you keep a job?

    Some would happily go to work, except that the cost of child care makes it prohibitive. Would you want to take a job that would only make you about 50 cents an hour? For many families this is the situation after taking into consideration child care costs, increased taxes out of your spouse's check, and the loss of food stamps. And you're not including the cost of gas, a bus ticket, work clothes (many of these jobs would require a very specific type of dress), etc.

    We absolutely have to stop treating the poor like they're lazy and not worth a damn if we ever expect things to truly get better in this country.

  • Madam Hatter (unverified)
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    Right on, Jenni. At least I can count on you to always "get it" when it comes to poverty issues.

    I must admit, I get a bit depressed reading Blue Oregon sometimes because so many here seem to disregard - or just appear totally oblivious - to the really difficult financial conditions facing so many of us out here.

    I know the Repugs certainly aren't my pals, but a lot of the Dems aren't very "friendly" to those of us struggling gamely along, either. With the exception of John Edwards, poverty simply isn't even on the radar for most pols unless it's been drug into the spolight - and then only briefly, like by Hurricane Katrina.

    With the raping and pillaging that's done at every level of government and private industry these days, it's immoral to keep harping on about "entitlements", and the rotten people who allegedly abuse the system. Or better yet - the way social services keep people in poverty.

    Would I rather be taken by Haliburton or a poor, single mom? Well, neither actually. But I'd rather that mom got an extra $100 a month in food stamps that she - per odious regulations and guidelines - may not be entitled to rather than the execs or shareholders of Haliburton getting new Rolls Royces - or $50,000 shotguns - or whatever those frivolous f@$%s piss their money away on.

    Sorry... there I go again.

    Anyway, my point is - it can happen to anyone. And it IS happening to a lot more people. And we are often too busy working 2 or 3 jobs, going to school, raising families on our own - to get involved politically. To be heard. To learn and understand the issues that affect us (why else was Bush still so popular the 2nd time around?). To feel that our insignificant voices will ever be heard.

    There's a whole bunch of disenfranchised, disillusioned people out here just waiting for someone to come along and really fight for them. It's a good fight. I don't understand why the Dems don't jump on this strategic - and moral - opportunity.

  • Brandon Drury (unverified)
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    "They don't know all the evils of payday loans. They know the fees seem a bit high, but what are they going to do if there are no other options? What are they going to do if they get evicted? Or if their electricity is turned off-- food in the fridge will go bad"

    So if payday loans are gone, where will these people get the short term financing necessary to handle these emergencies? If their credit was good, there are other outlets. But what are people low on cash with poor credit supposed to do when emergencies arise?

    Brandon

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    Brandon --

    Answer #1. Same place. Payday loan shops. Only at more reasonable rates. I think it's a silly assumption that if we cap interest rates to oh, say, 400% that no one will make those loans.

    Answer #2. Interesting question. How does it work in other states, where these interest rates are already capped?

    Answer #3. Part of the payday loan business is a created market. Sometimes an "emergency" isn't. ("I just NEED to have those shoes for the party this weekend.") Their promise of easy cash preys on innocent victims.

    Answer #4. The payday loan operations only make the emergencies come a little bit later - and make a lot more devastating. It's one thing to have a little $200 emergency; it's entirely another to have a $1500 emergency three months later; and another to have a $4000 emergency one year later. Getting rid of payday loan shops may bring the day of reckoning closer - but that's a good thing; it'll be more manageable for folks.

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    Oh, and Answer #5. This is the only problem in Oregon, nor is it the only needed solution. It's just part of the puzzle. If we have a problem with living wage jobs, we can work on that. If we have a problem with high electricity bills, we can work on that. If we have a hunger problem, we can work on that. If we have an affordable housing problem, we can work on that.

    To simply suggest that payday loan shops can solve those problems for folks is just silly.

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