Testifying on Payday loans

Rep. Jeff Merkley testifies on payday loans

On Wednesday afternoon, my sister and I took the hour drive down to Salem to testify in front of the Oregon House's Business, Labor & Consumer Affairs Subcommittee on Payday Loans.

Throughout the day they'd already heard from businesses who deal with payday and short-term loans, including local credit unions that have begun offering payday loans over the past year.

Credit Union representatives said that they sit down with a customer and find out the reasons for the loan, their financial situation, etc. so that they can see if there is a better alternative than a payday loan. If a payday loan is the needed solution, many of the credit unions charge no fees for loans and only charge between 10-18% APR. This compared to the 400-700% APR charged by payday loan shops.

My sister Danielle and I went down for the public hearing at 2:45. She had experienced problems with a payday loan company here in Oregon, which cost her more more than $300 for a $250 loan.

The interest on the loan was well over 600% APR, a fact that was not posted as required by law in easy view of a customer. Nor was it placed on the info sheet along with the rest of the info on the loan-- it was placed in a different location (top left-hand corner) and no work was done to draw attention to the fact the APR was listed there. The sheet was also printed on an old dot-matrix printer, making it difficult to read.

Before us, several customers of payday loans and representatives of organizations spoke on the topic.

They talked about how payday loan shops would cash checks early, causing hundreds of dollars in fees, and not allow early payment or partial payments. Many ended up having to take out additional loans to pay off initial loans that were only a few hundred dollars. Some paid more than $1000 in interest/fees on an initial loan of $100-200.

Several also spoke of having their loan rolled over many more times that the law currently allows. To get around the law, payday loan shops will start a new loan when a customer has reached their maximum roll-overs allowed under Oregon law.

Several people were representing religious organizations who saw the high interest rates as usury and were supporting reforms to the payday loan industry.

Others were with the Oregon Food Bank and its affiliates, which see many people in need of food because of payday loans.

State Representative Jeff Merkley also spoke on payday loans, how it is affecting people in Oregon, and why reforms need to be made.

He explained that the reason why so few complaints are heard each year, even though 700,000 such loans are made, is often because:
Business, Labor & Consumer Affairs Subcommittee on Payday Loans
1) People don't know who to complain to, or

2) Complaints are typically because someone is violating the set laws, but in this case there aren't any laws dealing with the interest rates, cashing checks early, etc.

I was extremely disappointed that one of the legislators on the committee left before we even got to the public testimony part of the meeting, and a second left halfway through. I seriously hope they go back and listen to the testimony and read the accompanying paperwork.

Chris Coughlin, Executive Director of Our Oregon, spoke to the committee as well. She gave them details on the ballot measure they are working to get on the ballot. Even when it passes, the committee will still have work to do, she told them. This ballot measure is only a beginning. There will still need to be work done on items such as title loans, which customers experience many of the same problems as they do with payday loans.

If you're interested in giving testimony to the Committee, they plan to take additional public testimony at a meeting in Eugene on April 18 (5:00 - 7:30).

You can listen to testimony at this Committee meeting here.

The agenda of the January 11 meeting was:

Organizational Meeting
9:30 Chair Welcome
Committee Member Introductions Informational Meeting

9:45 Invited Testimony: Department of Consumer and Business Services
History of payday lending in Oregon
Oregon regulatory framework for payday and other types of lending in Oregon
Current payday lending activity, Consumer survey
Regulatory provisions in other states

11:00 Payday Lending Industry Perspectives - Panel
Luanne Stoltz - Community Financial Services Association of Oregon
Mark Thompson - Money Tree
Jeffrey Aalvik - Customer
Jim Markee - Industry Representative

12:00 Lunch Break

1:00 Consumer Advocate Perspectives - Panel
Phillip Kennedy-Wong - Ecumenical Ministries of Oregon
Bob Castagna - Oregon Catholic Conference
Angela Martin - Oregon Food Bank
Rick Bennett - AARP

2:00 Other Financial Institution Perspectives - Panel
Pam Leavitt - Credit Union Association
Bob Corwin - First Technology Credit Union
Paul Cosgrove - Financial Services Association

Public Hearing
2:45 Public Comment Welcome

4:15 Adjourn