Thank
you, Chair Holvey and members of the committee, for the opportunity to
testify here today in support of House Bill 2203, regarding payday
loans. My name is Laura Etherton, and I’m OSPIRG’s Consumer Advocate.
OSPIRG, Oregon State Public Interest Research Group, is a non-profit,
non-partisan public interest organization.
OSPIRG
applauded when the Oregon Legislature passed a bill during last year’s
special session to give consumers new protections from payday loans’
previously unlimited interest rates and fees. This action sent an
important message that gouging consumers with outrageous interest rates
and trapping borrowers in a cycle of debt are unacceptable practices in
Oregon. Among its provisions, the bill capped annual interest rates at
36% plus a one-time loan origination fee of $10 per $100 loaned.
We
look forward to that law taking effect in July of this year. We support
HB 2203 because it makes important fixes to the law so that the
consumer protections are fair and effective, and we commend the
Governor and the Department of Consumer and Business Services for
bringing this bill forward.
This
bill will establish a much needed database to track payday loans. This
is an important tool to protect borrowers from becoming trapped in a
cycle of debt. Many consumers cannot repay a payday loan on the due
date, and instead pay additional fees to “roll over” the loan for
another short term. In addition, after the rollovers, many borrowers
resort to taking out a second payday loan to pay off the first, and a
third to pay of the first two, and so on. Because this cycle of
borrowing buries the consumer deeper and deeper in debt, Oregon law
limits the number of allowed rollovers to two, and prohibits lenders
from making a new payday loan to a consumer within seven days of the
end of a previous loan.
Establishing
a database system that tracks all payday loans should help lenders
comply with the law, and help prevent lenders from exacerbating the
payday loan cycle of debt by bouncing borrowers between different
lenders during to escape the seven day waiting period between loans.
We
also support the provisions that will apply Oregon’s payday loan law
not only to “bricks and mortar” payday loan stores, but also to
internet lenders and lenders who make loans by telephone or mail. This
is a common sense improvement in the bill to add fairness and prevent
internet and other types of payday lenders from evading the law.
Predatory lending is a serious problem in Oregon, and it will require
ongoing vigilance to protect consumers from excessively high interest
rates and fees and loans that trap borrowers in debt. House Bill 2203
will help to improve the law, and we urge you to approve it. Thank you.
