City may cash in payday loan rules
The City Council is moving forward with a plan to adopt regulations for Beaverton payday lenders.
City officials hope the move to regulate certain payday lending practices will protect the short- and long-term financial security of residents struggling to lift their families out of poverty.
'I'm glad the council took this one on,' said City Councilor Dennis Doyle. 'It's essential that we get this done.'
City Councilor Catherine Arnold agreed.
'This probably is a move in the right direction for the city of Beaverton,' she said.
Councilors are scheduled next month to cast the final vote on an ordinance that would require Beaverton payday loan businesses to apply for and obtain a permit to operate in the city as a lender.
It would also set rules allowing borrowers to rescind a payday loan within 24 hours and the right to convert a loan into a payment plan.
Payday lenders would not be able to renew an existing loan more than two times under the new rules.
The ordinance also prevents lenders from renewing a loan unless the borrower has paid an amount equal to at least 25 percent of the principal of the original payday loan, plus interest on the remaining balance of the loan.
Industry representatives asked the council Monday night to hold off on implementing any rules that could limit consumer choices.
'Our industry grew out of the needs of customers who had nowhere else to go,' said Rick Lember, who oversees 11 Fastbuck stores including one on Southwest Canyon Road. 'We take the risk out here.
'We fill a need. There are all kinds of stories about why people come and see us. For many people there are no other options.'
Payday loan businesses specialize in short-term and high-interest loans.
Beaverton's ordinance is similar to those adopted by Portland, Gresham and Silverton.
It also mirrors some of the groundwork laid by a bill passed by the Legislature in April.
The bill limits origination fees for a loan to $10 for every $100 of its amount, caps interest rates at 36 percent, sets a minimum loan term of 31 days and prohibits renewal of a loan more than two times.
The restrictions will take effect July 2007.
If adopted by the council at its July 10 meeting, Beaverton's regulations would be effective 30 days later.
Industry representatives are not as concerned with the city's ordinance as they are with regulations at the state level.
'The new legislation will essentially eliminate the payday loan industry as we know it today,' said Nina Hamman, district manager of six Money Mart businesses in the Portland area, including one on Cedar Hills Boulevard.
She said it was inappropriate for government officials to set an arbitrary number on rates.
'Let consumers make their own informed choices,' Hamman said. 'They know how much money they need.'
Angela Martin of Our Oregon, a nonprofit supporting payday loan reforms, is not convinced that the industry is doing all it can to ensure consumers are able to make informed decisions.
'In its present form, payday loans don't represent helpful credit,' she said.
Instead, they trap borrowers in a cycle of mounting debt, Martin told the council.