Oregon House And Senate Pass Law To Deny Credit To Oregon Consumers; Effectively Shuts Down Payday Lending In State

April 21, 2006
Source: RTO Online

Oregon - In a rushed vote during a special session of the Oregon legislature, both houses passed SB 1105, a law that will so severely limit interest and fees on short term loans, the likely result will be the denial of credit to hundreds of thousands of Oregon residents.

SB 1105 caps interest on payday loans at 36% APR, caps fees at 10%, Increases the minimum term of a loan to 31 days, sets maximum loan rollovers at 2, forces a 7 day waiting period between Payday Loans and limits returned check fees to $25.00.

There were sound-bites-a-plenty in Thursday's session. In her opening remarks, Representative Debi Farr (R-Eugene) quoted scripture and condemned the collection of interest for loaning money. A short time later, Rep. John Lim (R-Gresham), a supporter of SB 1105, added to the fervor by saying "When you're in debt, you are a sinner". Lim followed this statement with a lecture to House members about his home, three cars and zero debt.

Among the pertinent facts shared during debate, two stand out:

There were 750,000 payday loans in Oregon in 2004 (the last year for which the state has records)

There were 7 total complaints by consumers during that period. (Equals a complaint rate of 1 per 107,000 payday loans; or, if you translate that number into a satisfaction rate = 99.9999997% satisfaction rate.)

Rep. Farr closed her arguments by quoting from a survey of Oregon state employees who take out payday loans. She said, "In a study by DCBS (Oregon Department of Consumer and Business Services) of state employees that took out payday loans, 30% say they did so to buy groceries." She went on to ask how anyone can justify charging interest and fees for groceries. She did not answer the obvious, and politically inconvenient, question of why so many Oregon state employees need to borrow money to feed their families.

Industry supporters predict a 70% reduction in revenue for payday loan companies operating in Oregon if the Governor Ted Kulongoski signs the bill. The new law would take effect in July, 2007.

Best quote from the debate:

"I pay too much to have my shirt laundered, but I don't feel I can go to my dry cleaner and tell them I want to pass a law to reduce the cost.” - Representative Wayne Scott (R), Oregon House Majority Leader