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May-03-2007 14:52TweetFollow @OregonNews
House Approves Predatory Lending Rate CapSalem-News.com
Last year during a special session of the legislature, the House and Senate passed a 36 percent annual interest rate cap on short-term payday loans.
(SALEM) - The House of Representatives today approved a bill to impose a 36 percent interest rate cap on state-regulated consumer loans in Oregon. The bill, HB 2871, provides strong protections for borrowers of the more than 850,000 short-term payday and car title loans issued each year in Oregon.
"In any other area of the law, no legislator would endorse a system that contributes to bankruptcy, divorce and despair. So we shouldn’t do that with consumer loans either,” said House Speaker Jeff Merkley (D-Portland). "We have a responsibility to provide opportunities for individuals and families to thrive. We need to support systems that build wealth, not strip wealth."
Last year during a special session of the legislature, the House and Senate passed a 36 percent annual interest rate cap on short-term payday loans. Almost immediately, those lenders began to reorganize under the state’s conventional lending laws to avoid that cap. Under that law, a typical 60-day loan subject to the 36 percent cap could be offered without that cap if the lenders simply converted it to term of 180 days or more.
"Colleagues, this comes down to two simple questions,” said Rep. Chris Edwards (D-Eugene). “First, do you believe that there are loopholes in our previously passed legislation that will allow payday lenders to continue to charge exorbitant interest rates? And second, do you believe those loopholes should be closed? My answer to both of those questions is an unequivocal yes."
Oregon is currently one of only 16 states that do not cap interest rates on consumer loans. Oregon had a 36 percent cap on consumer loans until 1981 when the legislature lifted it. Since then predatory lenders have flourished, charging rates on consumer loans that have at times exceeded 500 percent. That means a person who borrows $200 could end up paying an additional $1000 or more for the privilege of borrowing that money.
"In reality, the point of this legislation is to close the loopholes that would allow predatory payday lenders to skirt any of the previous legislation we have approved," said Rep. Paul Holvey (D-Eugene), chair of the House Consumer Protection Committee. "This bill is a real win for Oregon consumers, as well as for the responsible consumer lenders who worked with us to craft the legislation."
Across the country, states that had eliminated caps are reinstating them. Interest rate caps in other states range from 17 percent in Arkansas to 60 percent in Georgia, but most states have determined that a 36 percent rate cap best guarantees access to credit while keeping usury in check. At the federal level, Congress recently enacted a 36 percent cap on consumer loans to all active duty military members and their families, underscoring the problem nationwide.
"I’m glad to see the legislature take on difficult issues and act on behalf of individual Oregonians and families, not for special interests,” Merkley said. “We all have a responsibility to restore fairness and protection for Oregon’s families – particularly those in difficult financial straits."
The Oregon Predatory Lending Cap Act passed the House on a vote of 37-21. It proceeds now to the Senate for further consideration.
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