Inside the world of the payday loan sharks

By Patty Wentz of Portland, Oregon. Patty is the communications director for Our Oregon.

As the legislature gets closer to passage of the Predatory Lending Package to end legal usury in Oregon, our friends at the Center for Responsible Lending are giving us a rare glimpse into the ugly underbelly of legal loan sharking. Check out this video from a former payday lender.

Meanwhile, here in Oregon, the lenders are maneuvering to dodge parts of the legislation, tricking loan applicants into opposing the bill, and working to weaken the package.

In other words, it's business as usual.

At issue is the four-bill Predatory Loan Package, which includes: House Bill 2203 to regulate internet, phone and mail payday loans; House Bill 2204 to regulates some types of car title loans; House Bill 2205 to implement underwriting requirements for payday loans; and, House Bill 2871 to set a uniform 36-percent cap on all consumer loans. Together, this package will close the legal loopholes that allow payday lenders to charge an average interest rate of 528 percent in Oregon.

Lenders have launched an aggressive campaign to protect their profits and kill the legislation.

Recently there has been a mad rush at the Oregon Department of Business and Consumer Affairs as payday lenders are poised to remake themselves a second time in order to avoid last year's Senate Bill 1105, which affects short-term loan licenses and is scheduled to go into effect on July 1, 2007. The rush started twelve weeks ago. See which lenders in your home town are making the switch.

The industry is also running a dirty tricks campaign, as reported by the Eugene Register-Guard this past Tuesday. Customers are being pressured to call the state legislature to oppose the predatory loan package.

"I felt kind of pressured, like if I didn't agree to make the phone call, I wouldn't be able to get the loan," one customer told the Register-Guard.

We are optimistic that these last-ditch, desperate measures will not block the Predatory Lending Package. All of the bills have been approved by the Senate Commerce Committee and are headed for a full vote by the Senate.

Tell your Senator to stand up to the dirty tricks of the car title and payday lenders and to vote YES on the entire Predatory Loan Package. Send an email today.

  • George Seldes (unverified)

    Thank you for posting this video and for your work on this issue. I get so mad about this I can't even see straight sometimes. You are building good karma here.

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    Can I play Devil's Advocate a bit on this issue?

    I would have never thought that I would be a defender of the payday loan industry until I sat on a Reed senior thesis on the topic. This student came to the issue with the same attitude that many of us have--that this is a predatory industry, that most borrowers "roll over" the loans, and that the lenders are taking advantage.

    Not surprisingly, the reality was quite a bit more complicated. I found myself, by the end of the thesis, being convinced that what was needed was not interest rate regulation, but much more effective outreach by consumer's groups and traditional financial institutions. The most common problem faced by the borrowers was ignorance of their financial options.

    This student's study was problematic: it was based on surveys filled out by borrowers, she varied the time and location, but it was not randomized. However, she found about a 1/4 (if I remember correctly--I can go check out the study) were "roll over" loans. (I looked on the Internet and I cannot find any statistics on how many loans are rolled over.)

    She found that most borrowers did not have a traditional checking account (too expensive).

    Most borrowers felt much more comfortable in the payday loan office, where the lenders made an effort to provide a customer friendly face (for example, Spanish is almost always spoken), in contrast to banks where many borrowers felt intimidated.

    I'm not convinced by a video made by a disgruntled employee--if you want to convince me that payday lenders are taking advantage of customers, provide me hard data on how many borrowers are rolling over loans. What is the typical payment on (for example) a $250 loan?

    I still feel like I need more information on this issue. It's easy to criticize the payday lending industry, but how do we avoid the most basic objection: consumers are freely choosing to pay these fees and use these services, and should it be the government's business to regulate how people manage their money?

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    By the way, here is the thesis. It can be checked out by anyone with interlibrary loan access:

    The true price of payday loans : intertemporal decision making and Portland's poor / Izarra Margarita Varela

  • Jack (unverified)

    Don't count on Patty Wentz giving you anything resembling a fair take on the PDL industry. For all their alleged "caring" of consumers, they refuse to admit that the 36% rate cap WILL put all PDLs out of business in Oregon. Just watch. By September 1st, they'll be history.

    And what will consumers do, without access to online lenders, either? The only thing they can: bounce checks. Gee, why is it that banks were exempt from the legislation?

    Has anybody bothered to look into who funds OurOregon? How about the 1,000 jobs that will be eliminated as a result? The decrease in business tax revenues to the state?

    Yes, Patty Wentz, Angela Martin and your pals at OurOregon -- looking out for the little guy (as long as that means they can continue to pull down their hefty lobbyist salaries).

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