One year later, predatory lending is dead in Oregon

Kari Chisholm FacebookTwitterWebsite

A year ago, new rules passed by Oregon Democrats on predatory payday and car-title lending went into effect. And the result has been dramatic, according to the Oregonian:

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.

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. ...

[Steve] 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.

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...

It's rather astonishing, actually, that these places couldn't survive by making loans at 36% annual interest (and with fees, 154%), which is the new, lower limit (down from 529% annual interest before). It's obvious that they were the financial-services equivalent of meth dealers, getting people addicted to repeated hits of a short-term rush that led into a downward spiral that destroyed their lives.

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.

For a lot of BlueOregon readers - whose incomes are dramatically higher than the median - this issue is largely a theoretical one. But for thousands of low-income Oregonians, this was a tremendous accomplishment.

Next time someone asks you if elections really matter, if the parties are really that different, or if candidates keep their promises, tell them about Jeff Merkley, the Oregon House Democrats, and the end of the predatory lending crisis in Oregon.

  • The Good, the Bad, and the Ugly (unverified)

    Kudos: Jeff, great job on the work around Payday loans! A victory we can all relish. Also wanna tip my hat to the interfaith community and labor as well for their great efforts.

    Non-Kudos: Jeff, thanks for not getting predatory lending legislation on subprime mortgages passed this past special session. Oh well....

    Special Non-Kudos: Gordo, thanks for nuthin'...

  • LiberalImage (unverified)

    While I never disagreed that regulation was needed in the payday loan industry, the Oregon legislature has essentially done little more than limit the options of low income and financially pressed people. While it seems offensive to ponder the notion of having to pay an interest rate of over 500%, the costs of overdraft and returned check fees can often far exceeds what that rate would have meant to most short term borrowers.

    Do the math: Overdraft your checking acount by $20 4 days before payday. If your financial institution charges $28 per overdraft like mine does, that over 5000% rate makes the payday lenders look like extremely nice guys.

    The real question is why nobody is going after the banking industry for this abusive financial practice.

  • Mike (unverified)

    This is a fantastic accomplishment - something Republicans never would have done.

    Does anyone know if Merkley is going to Netroots Nation? If so, I think it would be a great idea for us Oregonians who are going to get together sometime to meet each other and share ideas/plans for getting Merkley elected.

  • Sammy (unverified)

    The hypocrisy of this just wreaks Kari. First and foremost, Jeff made predator lenders an issue for political gain because they were a well-deserved but easy target. However, he did virtually nothing that actually demanded guts and integrity to actually help low income people who were resorting to those sleazeball lenders out of desperation. Like how he refused to do fight in the 2008 experimental session after Measure 50 failed (which would have put a heavier monkey on the back of lower income people anyway) for funding for health insurance for low income children.

    He may get kudos amongst a certain morally bankrupt segment of Oregonians like yourself, but most decent people don't see stunts like this as anything more but the empty posturing of a typical cowardly politician --- because it's the ONLY "accomplishment" he points to during his last two years as a House Speaker when he had many opportunities to actually show he had some integrity and leadership, it's become the opposite of a plus and makes him subject to legitimate derision. You should report on what Merkley and the rest of the legislature didn't do to help people who were ripped off by predatory lenders, since in my view those politicians are in the same class as the predatory lenders: They are just trying to profit politically off the situation while the scumball lenders were trying to profit financially.

    And while we are on the question of Merkley's credibility, why don't you Kari, as an insider, give us a thread-leading post on what the E-Board on which Merkley sits decided to fund, and what they decided to cut on June 17? Then we could accurately judge whether he and the rest of the legislative leadership actually acted responsibly during the 2007 and 2008 session in terms of what needed programs they actually didn't responsibly and sustainably fight to fund, and the cuts they left to themselves to make acting as the E-Board out of the (weak) glare of our crack(pot) state media?

  • (Show?)

    You need to join a Credit Union, LiberalImage. A good one. All but most of them are. There are plenty that will accept you.

    I have absolutely no clue why anyone would voluntarily choose to use modern day banks, given that the vast majority of them are financial vampires whose largest profit center is inventing new ways to steal their customers' money.

  • AJ526 (unverified)

    How do you know the income of Blue Oregon readers? Just curious... Maybe I could look up the incomes of my readers as well...

  • (Show?)

    We asked them. Here's our 2006 reader survey.

    Also, for sites with substantial traffic, Quantcast uses a large-scale survey panel to estimate as well. Here's BlueOregon's Quancast page.

  • (Show?)

    This was definitely a huge issue for those of us at the lower income levels. My sister and I went down to Salem to testify on this issue back when Merkley was working hard to pass the bill. I blogged about it back then, even including a photo of Merkley testifying to the committee.

    My sister had a loan back when they were unregulated. They charged her well over 600% interest, the rate was not posted as required by law, and then they went on to post the check before the agreed upon date (multiple times). Once everything was said and done, she'd paid more than $300 in fees on that $250 loan. It took months for her to get it paid off.

    She got another one after the regulations went into effect. She was able to get it paid off within the original time allotted, with much smaller fees.

    I think there are still other areas that need to be looked at (bank fees, for instance), but those are controlled by the feds and can't be regulated by the state. I mean, is it fair for the bank to charge you $35 when you go over on your account by $1?

    Yes, payday loan shops have shut down - that's because you can't get rich on them quickly anymore, so there's not as much of an incentive to run the shops. There are still a number of people using them - but you can't get rich quickly on 36% and limited fees the way you could on 636% and unlimited fees.

  • Cash Advances (unverified)

    Cash Advances are very helpful as everyday expenses spiral upward. Even one unexpexted expense can cause major financial difficulty. Cash Advances are easy to obtain and can be the perfect remedy to get you to your next payday.

  • John Charles (unverified)

    Of course beating up on payday lenders is a fun sport, and everyone can play. But there were thousands of credit-challenged customers of those institutions, and now they have one less option. I'm just wondering how many Blue Oregon progressives stepped up to provide an alternative to payday lenders. If credit scores don't really matter and good intentions are all we need, then it seems like it should be easy for liberals to invest their own money in neighborhood cash advance stores in order to demonstrate a new business model for this industry. As a proponent of open markets I look forward to reading about these success stories.

    John Charles

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    John Charles: I'm just wondering how many Blue Oregon progressives stepped up to provide an alternative to payday lenders.

    Good question, Charles. Here's the answer. Read it carefully. Hopefully you'll learn something.

    Press release from the office of Governor Ted Kulongoski. (reprinted here in its entirety, emphasis added)

    Portland, Oregon — Governor Kulongoski today announced a new consumer campaign – including a 1-800 hotline and web site – promoting payday loan alternatives and encouraging working Oregonians to avoid these high-interest loans.

    "We’ve made real progress protecting hard-working Oregonians from high cost payday loans," said the Governor. "But these new tools will help get this important message out – there are better alternatives for consumers than payday loans charging up to 500 percent interest."

    In April, Governor Kulongoski signed legislation establishing reasonable limits on payday lending charges to protect consumers from excessive price gouging. The law takes effect until July 2007. Today’s new tools offer consumers good information and options to avoid spiraling debt. By calling 1-800-SAFENET or visiting, consumers can find information about payday loan products offered by Oregon credit unions with significantly lower interest rates and fees. The Web site and 1-800 number can match consumers with credit unions they are eligible to join that offer the payday loan alternatives.

    The 800 number and the Web site are maintained by SafeNet, which provides information to consumers about a wide variety of health and human services. The Department of Consumer & Business Services (DCBS) and the Credit Union Association of Oregon are partnering with SafeNet to provide this new information to consumers about payday loan alternatives. Many credit unions began launching their products two years ago, after Governor Kulongoski and DCBS asked them to offer consumers a less-expensive option for short-term loans. With interest rates often more than 500 percent, payday loans create financial burdens and credit problems for consumers.

    As an alternative, credit unions average a $3 cost to the consumer for a 30-day, $200 loan. If that consumer went to a payday lender for the same loan, the cost would be between $60 and $85.

    "I appreciate the Governor’s leadership in protecting vulnerable consumers. And we are extremely pleased that Oregon’s credit unions are providing financially strapped consumers real options," said DCBS Director Cory Streisinger. "Our research shows many Oregon consumers have multiple payday loans and often extend the payback period, which means they are paying an exorbitant amount of money in interest rates and fees. We applaud credit unions for working with us to offer consumers a better choice."

    Consumers will save more than money when borrowing from credit unions, said Gene Poitras, president of the Credit Union Association of Oregon.

    "Credit unions care about the financial well-being of their members and can work with borrowers to help them get out of debt," he said, adding that credit unions also can help consumers by offering financial education resources to avoid payday loans.

    DCBS has produced fliers and posters for credit unions and other organizations to promote these payday loan alternatives. For copies, call DCBS at (503) 947-7897. In addition, a public education announcement about the alternatives — sponsored by DCBS and the Credit Union Association — will begin airing in early August on television and radio stations throughout Oregon.

  • (Show?)

    Of course beating up on payday lenders is a fun sport, and everyone can play. But there were thousands of credit-challenged customers of those institutions, and now they have one less option. I'm just wondering how many Blue Oregon progressives stepped up to provide an alternative to payday lenders....

    Your concern is touching as always John, and your intellectual dishonesty is, as always, front and center.

    The fact is, there are still plenty of predators out there and they still get to offer their humanitarian services at exorbitant rates. As a champion of the downtrodden, you can rest easy.


    Like Jenni, I've been there personally, although it was years back.

    I can still remember my pride in the free market when I schlepped stereo components to hockshop, or turned the title of my $400 car over to some weasel for a $75 loan.

    Good Times........

  • Joe (unverified)

    Wow, did you guys ever get it wrong. And you have no options for people who need this. See from your ivory tower you dont get that this isnt predatory.

    Your logic would mean that Starbucks is predatory, cause coffee at $5 bucks a pop over 2 bucks must not be the same thing.

    Adults should be allowed to have a choice. And for the record, the only reason APRs seem so high is because the Fed make you disclose an APR een if its a short term, loan, under a year etc, but they still make you show what it "could be" if it was APR'd like a car loan.

    Here are some facts, not nonsense.

    $100 payday advance with a $15 fee = 391% APR $100 bounced check with $54 NSF/merchant fees = 1,409% APR $100 credit card balance with a $37 late fee = 965% APR $100 utility bill with $46 late/reconnect fees = 1,203% APR.

    Myth: Payday loans trap borrowers in a never-ending “cycle of debt”.

    Researchers and state regulators consistently report that 70-80% of customers use payday advances between once a year and about once a month. People who bounce checks and use overdraft protection often do so at a higher frequency. The fact is that a payday advance is more economical than other options.

    Myth: Payday lenders take advantage of poor people

    Reality: Critics of the industry have been successfully perpetuating the myth that the payday advance industry exploits the downtrodden. By perpetuating this myth, they have created a warped idea of the industry’s customer base. Actually, payday advance customers represent the heart of America’s middle class. They are typical hard working adults who may not have savings or disposable income to use as a safety net when unexpected expenses occur.

    Here are the facts:

    * The majority of payday advance customers earn between $25,000 and $50,000 annually;
    * Sixty-eight percent are under 45 years old; only 4 percent are over 65, compared to 20 percent of the population;
    * Ninety-four percent have a high school diploma or better, with 56 percent having some college or a degree;
    * Forty-two percent own their own homes;
    * The majority are married and 64 percent have children in the household; and,
    * One hundred percent have steady incomes and active checking accounts, both of which are required to receive a payday advance. *

    *Source: The Credit Research Center, McDonough School of Business, Georgetown University, Gregory Elliehausen and Edward C. Lawrence. Payday Advance Credit in America: An Analysis of Customer Demand. April 2001.

  • steve (unverified)


    As a former committee staffer who worked on this bill with Jeff, I wanted to let you know that the reason we did not go after banks is because many, if not most, banks in Oregon are federally chartered and regulated by the Office of the Comptroller of Currency (a Federal agency). So really, this is a federal issue, the state of Oregon cannot successfully/effectively regulate bank fees, atm fees, overdraft fees charged by banks or credit unions.

    I agree that everyone should use credit unions because they are member owned, so their fees are typically lower and they ban together to form atm surcharge free networks where you can use another credit unions atm without incurring a surcharge.

    I have known Speaker Merkley since he was a rank and file member of the minority party and he has always cared about the financial worries faced by low-income Oregonians. This isn't coming from a politically motivated place.

    TO John Charles-

    How does payday lending help poor people develop better credit scores? As far as I can tell, they just syphon money out of poor peoples pockets. If all payday lenders reported on time payments to credit reporting agencies then you would have a point. They don't.

    I suspect you would oppose a law requiring that you report on time payments of your borrowers to credit reporting agencies because you want people to not have access to affordable credit, so they would continue using your shops. So your argument is a ruse.

    The fact is, once someone hits hard times and their credit score goes south, you have a captive clientele that you can charge 500% apr to. It would next to impossible for someone paying $80 on a $100 loan to ever get to the level where they could begin to pay off bills and mend their credit.

  • Chuck Paugh (unverified)

    Actually, it is not dead. Wells Fargo offers payday advance loans for those who receive their wages through direct deposit. The charge? 20% of the amount borrowed. You don't even fill out any paperwork. You got to your account online, click a box for payday advance, request an amount, and it is instantly deposited into your account. When your salary is deposited, the 20% fee is deducted first followed by the amount borrowed. There are some who would disagree with me, but I believe that 20% is a predatory rate.

  • (Show?)

    Chuck -- that's fascinating. A 20% fee on a loan that's less than two weeks? That's definitely more than 36% annual interest.

    Perhaps some of the advocates could help us understand why it doesn't smell as bad as it seems... or could take action to stop it. Anyone?

  • (Show?)

    Shouldn't the headline be "Predatory lending STILL dead?" Because it died the day the law took effect. Unfortunately, both the Speaker and his media consultant conflate a payday loan shop, charging LEGAL rates, with "predatory lending." Either predatory lending was banned--and thus Merkley and Chisholm are crowing about the shuttering of hundreds of legitimate businesses and loss of hundreds of jobs--or it wasn't, and thus there's no credit to take.

    From the last discussion, we know by the NY Federal Reserve study that closing predatory lending avenues actually leads to greater financial hardship in lower income sectors, if alternatives are not provided to fill the gap. Credit union loans are one avenue, but they a) require membership, b) have standards for membership, and c) often have limited outlets, especially in outer residential areas. If "credit union loans" is all there are, that's not coming close to filling the need.

    Usury needs to be regulated, no doubt. It was a great move to stop usury in Oregon. I don't get the glee over closures of legitimate businesses operating under the terms set by the Legislature. Ban the sale of 40s in a neighborhood, sure--but who would go celebrate the closing of the whole convenience store, if they couldn't survive otherwise?

  • James X. (unverified)

    I almost never do this but:


    Thank you.

  • Payday Loans (unverified)

    Payday Loans are good when you are in a bind and need to catch up on your bills, they are quick, easy, and confidental.

  • James X. (unverified)

    And I totally trust commenters named "cash advances" and "payday loans" to give me the spin-free facts about it. Payday loans destroy people in vicious debt cycles, and there's a MUCH better alternative with much lower rates from credit unions. You don't even need to be a member. Payday lenders are unnecessary.

  • Steve (unverified)


    The reason Wells Fargo can do the payday advance is because they are federally chartered and not regulated by the state of Oregon. The 36% across the board cap does not cover entities regulated by the Office of the Comptroller of Currency, only state regulated lenders. Banks can and probably will try to fill the void left because of tough state regs. The answer is to get a new president, and majorities in congress that are willing to impose reasonable regulations on lending to close the door on payday style loans. The state regs are an important first step. Public pressure is the best weapon right now to shame the banks into not filling the void of payday lenders.

  • (Show?)

    Is this federal charter relationship one of the things created by the repeal of Glass-Steagall?

  • John Charles (unverified)

    OK, I read the gov's press release and all the other posts, and nowhere did I see any evidence that the critics of payday lending have put their own capital at risk to offer a viable replacement service in the hundreds of neighborhoods where payday lenders used to operate. Happy talk about credit unions doesn't count; if credit unions were actually a better option, payday lending customers would be been using them all along.

    So now those people have one less option for getting quick cash. That doesn't make them better off, it simply deprives them of an important choice that they were exercising as adults. It may not have been a choice that many BlueOregon types approved of, but it was their choice to make.

  • (Show?)

    Really, John? "It was their choice to make..."

    I suppose if you're a libertarian-absolutist, that's a reasonable position to take. Along with legalizing heroin, eliminating food safety regulations, and ending public sewer services. The market can sort it all out, right?

    The rest of us who live in the real world, however, think it's appropriate to create some reasonable common-sense consumer protections - so that people who are too busy scraping out a living to read every warning label (oh wait, no warning labels in your world!)... er, too busy scraping out a living to personally research every product's provenance, safety record, and fiscal sensibility via independent sources can choose from among safe and sensible options.

    Frankly, if a lender can't survive on 36% annual interest, they're in the wrong business.

  • James X. (unverified)

    John, people do use advance loans from credit unions. They offer the same service at far lower rates. You may not be familiar with them because they don't advertise in neon lights in poor neighborhoods or with cheesy commercials during Jerry Springer, but that doesn't mean they're an inferior product.

    Usury laws are nothing new, they've been around for centuries. We've just let credit instruments get out of control in the last decade, and now things are starting to get fixed.

  • kenneth koger (unverified)

    Creating laws to reduce consumer loan availability during the current consumer crisis is dumber than a rock. It's the same kind of awful law changes that caused 1929 and the dreadful 1930's.

  • Dave Lister (unverified)

    I have no use for payday lenders either. I was in one of their establishments the other day (one of the few remaining) to buy a couple money orders and there was a person there leveraging the loan of her last loan of her last loan. She was thrilled when the teller told her she could have another 300 bucks, at God only knows what kind of interest rate. It was clear that she would never beat that cycle of indebtedness.

    That being said, I don't think there's really any chance that predatory lending is dead. It just isn't in legal storefronts anymore. You can bet your bottom dollar that there are loan sharks out there, working the bars and video poker parlors at rates probably more exorbitant than anything imagined by the previously sanctioned businesses. And these are the kind that break your legs when you get behind in your payments.

    I find the contrast interesting.

    People criticize the anti-abortion folks by saying that, if abortion becomes illegal, women will fall prey to back-alley abortionists with all the attendant health risks.

    So now we outlaw "predatory" lending practices and desparate folks will resort to back-alley loan sharks, with all the attendant health risks.

    By the way, I am proudly pro-choice, and always have been.

  • llywrch (unverified)

    One thing to keep in mind when comparing Payday Lenders interest rates vs. NSF fees is this: you can always ask your bank to waive an NSF fee. If you rarely bounce a check (say one time in two or three years -- or less often), they're likely to do that just to keep you as a customer. While the banks make a large share of their profits from these fees, they are also aware that they have to give a little to keep their customer base.

    On the other hand, that usurious interest rate the Payday Lenders charge is how they make money. They aren't about to wave or reduce that interest rate just because you're a good customer.


  • John Charles (unverified)


    If you think payday lending can be profitable at 36% annual interest, why don't you open a store yourself and show us this kinder and gentler business model?

    I'm not a libertarian absolutist; I just think adults should be allowed to make their own choices, including choices that I disagree with, like playing the lottery or smoking cigarettes. Now that you and your friends have taken a choice away from the former clients of payday lenders, you owe it to them to come up with a replacement. The fact that you haven't, and won't, is telling.

  • (Show?)

    Payday loans have not completely gone away - it means that in a one mile radius in Gresham or Portland east of I-205 that you'll find a handful of businesses instead of 20 or so. You can still get them, there just isn't 3 on every commercial corner in town.

    And regulating their fees and interest is nothing new - we're way behind in keeping that industry from legalized loan sharking.

  • LiberalImage (unverified)

    I still think there is a bit of an 'ivory tower' syndrom on this issue. The $28 overdraft fee I cited is in fact what my CREDIT UNION charges. It is in fact what they attempted to charge me for overdrafting my account by $1.25, 2 days in advance of my payday. That's simply appalling and criminal compared to the payday lending law.

    It's also not realistic to expect that everybody with a pressing need for cash can simply get a payday advance loan from their bank or credit union. They check credit ratings, and that is one of the primary reasons people resort to payday lenders in the first place, because nobody else will help when your credit isn't very good!

    Again, I look at this as having taken away an option rather than improving what's available when the banks AND CREDIT UNIONS have been getting away with this kind of garbage for years.

  • (Show?)

    If you think payday lending can be profitable at 36% annual interest, why don't you open a store yourself and show us this kinder and gentler business model?

    I've got a business to run, thanks. But John, next time you need a few hundred bucks, give me a buzz. I'll happily make you a loan at 36% interest. (And no origination fee, either!)

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