Payday lenders on a desperate search for loopholes

138 storefronts apply for new loan licenses that would allow unlimited interest rates while lenders run a dirty tricks campaign and fight to neuter 36-percent interest rate cap

[Portland] – As the legislature debates the Predatory Lending Package to protect consumers from triple digit interest rates charged by car title and payday loan shops, 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.

"Payday and car title lenders treat the Oregon legislature like they treat their customers," says Angela Martin, director of Our Oregon's economic fairness coalition. "They are twisting the truth and using backdoor tactics to protect a business model that counts on legal usury."

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.

Meanwhile, lenders have launched an aggressive campaign to protect their profits and kill the legislation.

Recently there has been mad rush at the Oregon Department of Business and Consumer Affairs as payday lenders are poised to remake themselves a second time 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. Since then 138 storefronts owned by companies such as Advance America and Cottonwood Financial have applied to switch to conventional loan licenses that would exempt them from Senate Bill 1105. Storefronts from Astoria to Ashland, from Keizer to Roseburg have applied for the new license. Click here to 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 today. 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.

And lenders have a backup plan in case they fail to stop the Predatory Loan package – they have proposed an amendment to House Bill 2871 that would neuter it to such a degree that they could continue making 500 percent loans and trapping Oregonians in long-term debt.

House Bills 2205 and 2871 will be heard in the Senate Commerce Committee on Wednesday, May 30th at 3pm. House Bills 2203 and 2204 have already passed out of that committee and are headed to the Senate floor.