Governor signs payday loan reforms.

Byline: David Steves The Register-Guard

SALEM - Oregon's check-cashing operations no longer can charge big fees to their customers and, in two weeks, short-term lenders will face similarly tough restrictions under a package of bills signed into law Tuesday by Gov. Ted Kulongoski.

The bills marked a success for religious, consumer-protection and labor groups that for years had tried to crack down on what payday and car title lenders and check-cashing stores could charge.

Last year, these groups gained traction when then-House Speaker Karen Minnis relented on her Republican-controlled chamber's refusal to take up the issue.

But with that 2006 bill's effective date in July approaching, this year's Legislature and the governor revived the issue, expressing concern that short-term lenders would find and exploit loopholes in the law.

The result: a four-bill package that became law Tuesday with Kulongoski's signature.

Kulongoski said the new laws would ensure that lower-income consumers and those with poor credit - who often are the customers of the businesses targeted by the new laws - would be treated fairly when they need to take out a small loan or cash a check.

"Far too often, those who can least afford it end up paying the highest price," Kulongoski said.

He singled out for praise several lawmakers who championed the bills, including House Speaker Jeff Merkley, D-Portland, and two Eugene Democrats who chaired key committees: Rep. Paul Holvey and Sen. Floyd Prozanski.

The bills signed by the Democratic governor seek to limit fees and interest rates by going after:

Check-cashing charges. Under House Bill 2202, fees can be no more than $5 per check or a percentage of the check's value, whichever is greater.

The percentage is capped at 2 percent of checks issued by the government, 3 percent for a payroll check and 10 percent for personal checks. The law took effect when the bill was signed.

Internet lenders. House Bill 2203 requires out-of-state short-term lenders that use the Internet or other methods to comply with the same restrictions in place for in-state lenders. The law took effect when the bill was signed.

Title loan charges. Under House Bill 2204, these lenders can charge no more than a 36 percent annual percentage rate, along with up to $10 in loan origination fees per $100 borrowed.

Loan terms must be at least 31 days and "rollovers" can be made no more than twice. The law takes effect July 1.

Consumer-finance loans. House Bill 2871 sets a cap of 30 percent above the federal discount rate.

This would apply to all short-term lenders, including traditional consumer-finance businesses and payday lenders, many of which had been applying for relicensing as consumer-finance operations to avoid last year's restrictions. The law takes effect July 1.

As the Legislature closed in on passage of its bill, lobbyists for payday and title lenders and check-cashing businesses warned that consumers would have more difficulty getting short-term loans - in large part because these operations would leave the state.

Lobbyist Paul Cosgrove said the Legislature's zeal to go after these short-term lenders and any loopholes they may try to use ended up ensnaring a separate and undeserving group of businesses: traditional consumer-finance services.

Cosgrove, who represents the trade association, the Oregon Financial Services Association, said these businesses follow more consumer-friendly practices, such as amortizing loans.

"One of my members has already announced it is closing its nine branches in Oregon and leaving the state and others will follow," Cosgrove said, referring to Continental Loans, which has a branch in Eugene.