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Short-term money lenders, barred from 13 states and regulated in most others,
are multiplying in Portland, Oregon where they face few rules and no interest
caps. Payday and car title lenders routinely charge annual interest rates of 521
percent. They made 2.9 million loans in Oregon over the past five years and sued
thousands of Oregonians to collect the debts.
The number of stores making the loans in Oregon has doubled since 1999. Seventy
companies now operate over 360 stores, including 150 in the Portland area.
That's about the same as the number of Starbucks and 7-Eleven stores in Oregon
combined.
Permissive laws, greed and an ever growing population of low-income, sometimes
desperate workers have produced the short-term loan explosion in Oregon. Oregon
has the highest density of payday lender stores on the entire West Coast: 10.1
per 100,000 residents compared to 9.7 per 100,000 in Washington, and 6.4 per
100,000 in California.
Oregon Food Bank managers say that many people coming to food pantries are
struggling with payday and title loans. A growing number of religious, community
and political leaders say the short-term loan industry is predatory and immoral
and should be regulated. "It is exploitation," said Phillip Kennedy-Wong,
director of public policy at Ecumenical Ministries of Oregon, a coalition of 17
Christian denominations. "It borders on usury."
The lenders operate out of tidy storefronts in Portland strip malls and along
major boulevards. Many flash neon signs reading "Title Loans" and "Payday
Loans.” At least 16 can be found along Powell Boulevard in Southeast Portland
alone.
Inside, friendly tellers stand behind panels of plastic or bullet-proof glass.
They make loans averaging about $300 in cash to anyone who can show a car title,
identification or a pay stub, and a check dated for next payday. The service
appeals to borrowers because it is quick, personal and does not pry into their
credit history.
Payday lenders in the Portland metro area typically charge $15 to $20 for each
$100 they lend, which equates to annual interest as high as 521 percent. Oregon
administrative rules allow them to lend up to 25 percent of the borrower's
monthly salary.
Lenders argue that the high annual interest rate doesn't matter because loans
are typically for only two weeks, making the cost less than fees most banks
charge for bounced checks.
The price soars higher, however, when borrowers cannot repay their loans on
payday, which studies show is the case for most. Lenders then charge another fee
to extend the loan.
A borrower in the Portland metro area, for example, might pay $60 for a two-week
$300 loan. But Oregon law allows lenders to roll over loans three times. So,
over eight weeks, a borrower could end up paying $240 in interest for a $300
loan.
Some borrowers go to a second lender when their rollovers are spent, borrow
money to pay off the first and pay more for more rollovers. Washington and
California limit loans to $15 per $100 and allow no rollovers. California limits
loan amounts to $300; Washington to $700.
Some Oregon lenders allow borrowers to set up a payment plan if they are unable
to pay after three rollovers. But many take borrowers to small claims court, win
a judgment and garnishee their wages.
Anyone who owns a car can borrow money from car title lenders, who use the title
for collateral. Title lenders, illegal in Washington, can make loans for up to
60 days and roll them over six times, extending them over a year. Conventional
consumer lenders, allowed to make longer term loans for up to $50,000, also can
make car title loans.
The loans have not worked out for thousands of Oregon borrowers who got sued
and, in some cases, had their wages garnished.
At least two other lenders have filed more than 1,000 court cases and,
collectively, short-term lenders filed more than 12,000 cases in Oregon -- most
in the last five years. Community Financial Services Association of America, an
organization for payday lenders, said its studies show that two-thirds of payday
borrowers live in households earning more than $25,000 a year.
But other studies, most of which look at wages rather than household income,
find borrowers on average earn $25,000 or less. That's what Oregon regulators
found in an unscientific survey last year of 309 state workers and 1,054 other
payday customers.
Nearly half of payday borrowers in Oregon earn less than $24,000 a year, and
another third earned between $24,000 and $36,000, according to the spring survey
by the Division of Finance and Corporate Securities.
Half of those in the state survey had borrowed more than $1,000 in the past
year, and seven of 10 had rolled over their loans at least once. Two-thirds of
those who had rolled over loans did it three times or more. More than three
times is illegal.
The top reason customers cite for borrowing from payday lenders was to pay
bills. Other needs, in order of priority: groceries, car repairs, gasoline,
medical and other loan payments.
In the mid-1990s, the payday lending business evolved from check-cashing stores.
Oregon began licensing the payday stores and car title lenders as a separate
class in 2000. The industry boomed.
The state estimates gross revenue for payday loans in Oregon last year was
between $37 million and $49 million -- four times what they made five years
earlier.
About 69 percent of the companies are based elsewhere. The largest, Advance
America, one of five publicly traded payday lenders, reported annual revenues of
$570 million last year, a 16.5 percent increase over 2003. Advance America,
based in Spartanburg, S.C., operates 53 stores in Oregon, more than any other
company.
The Consumer Federation estimates there are about 22,000 short-term,
high-interest money lenders nationwide. Even in states such as Georgia, North
Carolina and Maryland that have tried to eliminate them, they evolve and elude
regulation by partnering with banks or operating as catalog, Internet or phone
card services.
Contact the Portland offices of Pacific Bankruptcy today, if you have taken out
any payday or car title loans. Feel free to contact any of our offices at
503-352-3690 or simply fill out an evaluation form and one of our attorneys will
contact you on a date and time of your choice.
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