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'...

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.

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.

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?

http://www.examiner.com/a-1462693~OreE_Board_authorizes_funds_for_salariesother_projects.html

http://www.oregonlive.com/news/oregonian/david_sarasohn/index.ssf?/base/editorial/1213404913212650.xml&coll=7&thispage=1

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

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.

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

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.

LiberalImage

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.

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.

I almost never do this but:

PAYDAY LOANS ARE WORTHLESS GARBAGE. THEY ARE NOT A USEFUL OPTION FOR PEOPLE. THEY DESTROY PEOPLE. THE USEFUL OPTION IS SALARY-ADVANCE LOANS FROM CREDIT UNIONS.

Thank you.

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

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.

Kari,

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.

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.

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.

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.

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.

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.

Geoff

Kari,

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.

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.