Revive usury law.
The only way to end predatory lending in Oregon is to impose a blanket limit on interest rates charged on consumer loans.
Oregon had such a usury law until 1981, when legislators joined other states across the country in scrapping interest limits.
It was free market ideology in action, and the idea was to lift restraints on the consumer credit marketplace's ability to self-regulate through competition, supply and demand. The practical result was a seamy proliferation of payday and car title lenders that preyed on low-income Oregonians, charging interest rates of more than 500 percent and trapping the the poor, naive and desperate in death spirals of debt.
In a special session last year, the Oregon Legislature approved a state law cracking down on the exorbitant interest rates charged by payday loan industry. Although the law is not scheduled to take effect until July, payday lenders immediately began scurrying to apply for different licenses that will enable them to continue charging the same high interest rates.
Earlier this year, the House passed four new bills that closed some of those loopholes, and those measures are working their way through the Senate. But there's no guarantee that high-interest money lenders won't find new ways to avoid regulation and continue gouging the poor.
Now, House Speaker Jeff Merk- ley, D-Portland, has proposed that the Legislature follow the lead of the growing number of states across the country that are reinstating their usury laws. The House Consumer Protection Committee this week approved Merkley's House Bill 2871, which would impose a blanket 36 percent cap on all consumer finance loans - payday, car title and you name it.
Called the Predatory Lending Cap Act, the bill would allow payday and car title lenders to charge an initial $10 per $100 of loan amounts or $30, whichever is less. Loans could not be made for less than 31 days, and interest rates could not exceed 36 percent on loan renewals or rollovers, which would be limited to two. The bill would not apply to consumer loans for more than $50,000 or to larger real estate and commercial loans. Banks and credit unions would not be affected.
Payday loan businesses, who have spent a ton of money contending that they meet a legitimate demand for short-term credit, whine that Merkley's bill would put them out of business. That's what they've said in the many other states that have clamped down on them, yet the industry has managed to survive, even thrive, in regulatory climates.
State lawmakers should adopt Merkley's bill, which is the only sure way to prevent predatory lenders from devising ever new and insidious ways to take advantage of the state's poorest and most vulnerable citizens.