Luanne
Stoltz and Maryann Olson share some things in common: Both are white
women in their 50s who live in Portland and have undergone career
changes. And both have taken advantage of Oregon's freewheeling
payday-loan business. In fact, without payday loans, neither woman
would be where she is today.
The similarities stop there.
Stoltz,
53, taught math at Aloha High for 20 years. Seven years ago, she
retired from teaching and began making payday loans. Now, she owns two
stores called Anyday's Payday, on Southwest Barbur Boulevard and
Southeast 82nd Avenue. Stoltz also owns a Jaguar and lives in a West
Hills home worth nearly $1 million.
Stoltz is a leader of one of Oregon's fastest-growing industries—making short-term loans to people with few financial options.
State
figures show that the number of payday-loan stores in the state has
doubled, to 365, in the past five years. Much of that growth has come
from out-of-state companies flocking to Oregon, where, unlike in many
other states, there is no cap on the interest rates lenders can charge.
For
instance, Advance America of Spartanburg, S.C., which is the nation's
largest payday lender with 2,598 shops, had no presence in Oregon in
2002. But, by the end of 2004, Advance America owned 42 payday stores
here.
All
told, in 2004 (the latest year for which the Oregon Department of
Consumer and Business Services has figures), the state's payday lenders
made 768,123 loans.
That's
about one loan for every three Oregonians between the ages of 18 and 65
and nearly three times the number payday lenders made here in 1999.
Clearly,
that demand exists for payday loans. "Customers thank me every day for
the service we offer," Stoltz says. "It's really a very satisfying
business."
Olson's experience leads her to a different conclusion.
A
former nurse, Olson, 58, now lives in an adult foster home in the
Powellhurst-Gilbert neighborhood in outer Southeast Portland with four
others.
She
hobbles awkwardly with the help of a walker and special shoes that cost
more than $200. She says multiple sclerosis has twisted her feet,
making one leg an inch and a half shorter than the other, and prevented
her from working since 1986.
Two
years ago, Olson's custom shoes wore out. She says she could not afford
another pair. Nor could she borrow from friends or family. With no
income other than a $643 monthly Social Security disability payment,
she had few options. "Nobody wants to lend somebody like me money,"
Olson says. "I understand that."
Nobody except payday lenders.
Olson then did what many payday borrowers do—she connected the bright neon signs offering easy money with her own dire straits.
Here's how she descended into what critics of payday lending call a "spiral of debt."
In
January 2005, Olson says, she went to Rapid Cash at Southeast 122nd
Avenue and Powell Boulevard and asked to borrow $150. She signed a
promissory note and handed over a check postdated for two weeks later
for $176.76—the original amount plus interest. That amounts to an
initial annual percentage rate of 465 percent—although the rate would
climb with penalties.
After
two weeks, when the $176.76 check was supposed to be cashed, Olson says
she did not have the money in the bank, so she paid another $25 to
extend the loan for another two weeks. Two more times, she did the same
thing. That meant that after six weeks she had paid $101.76 for the use
of the original $150. "Every time I wanted to get rid of the loan,
something else came up," Olson says.
At
the end of three extensions or "roll-overs," Olson had to pay up. So
she did what a lot of payday borrowers do: She went to another payday
lender to pay off Rapid Cash. When Olson exhausted her three roll-overs
at the second lender, she found a third. And later, a fourth and a
fifth and a sixth. "I paid some of them off, but then I had to keep
borrowing to pay off the old ones," Olson says.
Eventually, Olson says, she ended up owing six payday lenders nearly $1,900, all for one pair of shoes.
Olson
admits she did not pay attention to the rate she was paying at first.
"Being desperate as I was for the shoes, I wasn't as concerned about
the rate as I should have been," she says. "Not until this got out of
control did I really look at the forms."
In the end, the money Olson borrowed on her first payday loan cost her 12 times what she originally borrowed.
Olson's
experience may be worse than most but is hardly unprecedented. A study
done last year by the Oregon Student Public Interest Research Group
found that when all the fees are included, the average annual
percentage rate for payday loans in Portland is more than 500 percent.
