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.