Governor Signs into Law Consumer Protections on Financial Services

(SALEM, Ore. ) - Citing the importance of ensuring all Oregonians have access to affordable financial services, Governor Ted Kulongoski Tuesday signed four bills that cap the fees on check-cashing and consumer loans, reducing costs to consumers.

“Unfortunately, far too often those who can least afford it to wind up paying the highest price for financial services – shortchanging their paychecks and sometimes creating an insurmountable cycle of debt,” the Governor said. “Consumer protection – at its core – is about the principle of fairness and today I’m signing into law four bills to ensure that consumers are treated fairly in their financial practices.”

The consumer finance legislation builds on the Governor’s leadership to win approval of a 36 percent interest rate cap on payday loans during the April 2006 special session.

Three of the bills, HB 2002, 2203 and 2004 were identified as priorities by the Governor and pre-filed before the beginning of the session on his behalf.

House Bill 2871 was spearheaded by House Speaker Jeff Merkley to provide a comprehensive cap on interest rates for all lending in Oregon.

HB 2202 – Limits check cashing fees to the greater of $5 or 2 percent for checks issued by the U.S. Government, the State of Oregon, or the municipality where the check is cashed; the greater of $ 5 or 3 percent for payroll checks and all other government checks; and the greater of $ 5 or 10 percent for personal checks. The total fee for cashing any check cannot exceed $100. Also establishes licensing requirements for check-cashing businesses. HB 2203 – Establishes a level playing field by applying Oregon’s payday lending laws to all payday loans made to borrowers in Oregon, include those made by internet lenders or other lenders with no physical presence in Oregon. In addition, the bill allows the Department of Consumer and Business Services to implement and require payday and title loan licensees to participate in a statewide lender database to help ensure compliance with the rollover and seven-day wait limitations applicable to these loans.

HB 2204 – Sets interest rate and fee caps on vehicle title loans to match the caps on payday loans, requires a minimum term of 31 days, and limits loans to two renewals. The bill also prohibits a title lender from making a new title loan to the same consumer within seven days of the expiration of the previous title loan. “Sale-leaseback” arrangements are included in the definition of title loans and are subject to these limits.

HB 2871 – Caps interest rates for conventional consumer finance loans as well as payday and title loans to ensure that consumers are protected regardless of the loan type, and to keep high-cost lenders from finding and exploiting loopholes. Conventional loan rates are limited to an annual percentage rate of 36 percent or 30 percentage points above the discount rate on 90-day commercial paper, whichever is greater. The bill further restricts fees that can be charged by payday and title lenders; regulates brokers or facilitators of loans; and allows contract terms and other charges to be set by rule.

Speaking before a group of legislative, community and religious leaders, the Governor emphasized the breadth of consumer protections undertaken during the 2007 session.

“This will be remembered as a landmark session for consumer protection,” the Governor said. “Together, these reforms reflect my commitment, and the commitment of my fellow Democrats’, to ensuring that Oregon consumers are entitled to basic fairness in the marketplace and given an equal opportunity to succeed in society.”

HB 2090 – Protects personal data filed with the Secretary of State from identity theft.

HB 2107 – Requires construction contractors to notify the Construction Contractors Board (CCB) of unpaid judgments or arbitration awards that involve either breach of contract or negligent or improper work related to construction of a residential structure.

HB 2213 – Requires insurers to offer advance costs estimates for key medical services.

HB 2654 – Directs the CCB to establish standard contract terms for residential construction, addressing consumer rights and also requires residential contractors to offer a warranty and to provide maintenance information.

HB 2708 – Prohibits construction agreements from requiring indemnification for damages caused by negligence.

HB 2941– Expands Oregon law requiring car dealers to correct any problems discovered in a sold vehicle to include cars purchased in another state.

SB 91 – Requires licensed contractors to notify the CCB of changes to the names or address of owners, officers, managers, members, trustees, or responsible managing individuals.

SB 116 – Prohibits towing without required notice. Prohibits towers charging more than price disclosed. Prohibits requiring agreement not to dispute reason for tow, charges or condition of vehicle. Specifies hours of redemption for towed cars.

SB 117 – Authorizes the state to bring enforcement actions for the federal Do Not Call Registry in state court.

SB 118 – Authorizes the state to punish price gouging during times of emergency.

SB 122 – Prohibits businesses sending consumers promotional checks that create a financial obligation once signed.

SB 257 – Makes variable annuities subject to state insurance and securities regulation.

SB 583 – Establishes strong safeguards for personal information against identity theft. Requires consumer notification of breaches in security of information. Gives consumers the ability to obtain a security freeze on their credit file in event of identity theft.

SB 684 – Requires a permit from the Secretary of State to conduct a going-out-of-business sale. Limits sale length to 90 days. Limits sale to one per year.

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Payday Loan Advocate October 21, 2008 10:44 pm (Pacific time)

The third and last U.S. Presidential Debate took place in Hempstead, New York on October 14, 2008. Senator Barack Obama of Illinois took off running with an eight-point lead, according to an average of national polls as collected by CNN. Sen. John McCain of Arizona took advantage of Obama’s unruffled carriage and laid the younger candidate’s policies, judgment and qualities of character out on the table. McCain quickly pointed out that he was “not President Bush” as soon as Obama responded with a more critical stance regarding the economic policies of the past eight years. McCain stated that he would enact an “across the board spending freeze,” chop off some programs and get rid of the remaining once the dust settled. On the other hand, Obama presented a more conservative stance about the issue. He would “go through the federal budget page by page, line by line” in order to close programs that aren’t working as they should be. Both candidates declare to bring a resolution to America and its decreasing economy. However, will it leave consumers with the ability to choose where or when to have access to payday loans? That remains unclear. Just because it is said that Americans are living in “the land of the free” doesn’t mean that interest groups (i.e. banks and credit unions) are of the same mind to have the freedom to choose.Post Courtesy of Personal Money StoreProfessional Blogging TeamFeed Back: 1-866-641-3406Home: http://personalmoneystore.com/NoFaxPaydayLoans.htmlBlog: http://personalmoneystore.com/moneyblog/

Payday Loan Advocate September 29, 2008 3:27 am (Pacific time)

With our economy falling behind, the war on terror, pork barreling legislation, corruption, and criminal activity on the rise, payday loans should be the last thing on politicians’ minds. Payday loans are simply for short-term financial assistance for the all-American family to cover some cost that wasn’t budgeted or an emergency that they couldn’t pay for at that moment. They provide help to citizens during these financially troubling times with loans that the government otherwise couldn’t provide themselves.

Anonymous July 13, 2007 2:42 pm (Pacific time)

What does this mean for those who already have loans at 300% interest?

James Smith June 21, 2007 12:33 pm (Pacific time)

A Discussion of the Economic Viability of the Small Loan Service Provider A finance charge of 36% per annum sounds like a lot of percentage, and it is in certain cases. For example, a finance charge of 36% per annum on a $100,000 loan is a lot of money, but 36% on a $100 loan does not produce enough revenue to service the transaction. That person who believes 36% per annum is enough across the board regardless of the size of the loan is, perhaps unknowingly, advocating effective prohibition of those loans that do not produce enough revenue to be economically viable. The result will be a lack of financial resource for those consumers who deem a regulated small loan service to be of value in pursuit of their personal best interests. This prohibition will apply equally to banks, credit unions and other small loan service providers. No business can or will provide a service below its cost except for a relatively short time as an advertisement loss leader. Any person who naively believes that a bank or credit union should or will permanently provide this service below its cost in the volume demonstrated and demanded by the general public will be disappointed. To permanently provide a service below cost of production will require subsidy from an independent source such as government. One loan of $100,000 times 36% per annum results in annual revenue of $36,000, divided by 12 months equal $3,000 revenue per month. In a simplistic view, if the lender borrows funds at 6% per annum, that leaves $2,500 per month to pay other costs of providing the loan service. That would indeed be a lot of money. Just a few loans would provide a profitable revenue stream to the lender with a typical store front expense structure. But, no company would loan $100,000 at any percent per annum without substantial collateralization. The reasonable qualified consumer with collateral would reject a $100,000 loan at 36% per annum as inappropriate. $100 times 36% per annum results in annual revenue of $36, divided by 12 months equals $3 per month. Is this enough revenue to make a $300 uncollateralized signature loan economically viable? Let’s do some math. First, let’s assume that $20,000 per month is a reasonable expense structure to provide a single place of business, utilities, employ two staff persons, depreciation of essential furniture and equipment, governmental taxes, licenses and fees, legal and accounting services, advertising, cost of supervision, interest on funds invested in the business, and a reasonable bad debt experience. Let’s ignore profit or other corporate overhead for this exercise. $300 times 36% per annum equals $9 per month revenue from the loan. A monthly expense structure of $20,000 divided by $9 equals 2,222 active loan customers required just to cover expenses. Any reasonable person will recognize that a staff of two persons cannot service the volume of the multiple transactions required by 2,222 active customers. The staff must number four, five or six persons depending on their level of experience and capability. But now, the monthly cost may be approaching $30,000 to provide for the additional staff, larger quarters to service the increased number of customers, the additional bad debt experience and other costs that escalate with volume. A monthly expense of $30,000 divided by $9 equals 3,333 active customers, which requires more staff and etc. It soon becomes impossible to service the sheer volume of transactions necessary to produce the revenue to overcome cost, plus provide a profit when restricted to revenues produced by monthly limitation of 3%. Many communities will not support the large number of 3,333 (or more) active customers required to cover the cost of the service provider. The result will be denial of a loan service for $300 to everyone in that community. What is the minimum size loan required to produce the revenue to cover the costs of a two person office at 3% per month revenue limitation? Let’s assume that a well trained and competent staff member can service 350 customers, times two persons equals 700 active customers. This means that a $20,000 monthly cost divided by 700 customers will require revenue of $28 per loan (or more). $28 divided by $3 means that the minimum size loan under these assumptions must be $900. Realistically, the minimum size loan must produce enough revenue to cover other corporate overhead and to allow a profit to the service provider. A good assumption would be that any service provider, including a bank or credit union (without subsidy), will by necessity limit their service to loans well over $1,500. The minimum loan amount will increase as inflation drives cost upward while the percentage revenue formula remains the same. Most banks will not make a consumer loan now under $2,000 because a smaller loan is not profitable. That consumer who cannot qualify for a loan of $1,500 will be without a loan service resource. The reader may disagree with some detail in the above assumptions but by and large they are representative of the current circumstances for providing a specialized small loan service. A rate structure limited to 36% per annum will today effectively prohibit loans less than $1,500. And then, only the qualified consumer will have access to a lender. What measurement tool should be used to determine if the public will be allowed the convenient availability of small loans of $200, $300, $500? Is it cost only? Or is it the personal preference of the general public as demonstrated in the huge demand for this service at some cost? Who shall make this decision? Shall it be the consumer that wants to use the service or will it be the politician or media editorialist who has no need to use the service? Whose wishes should prevail? Whose wishes shall prevail? The politician or activist who advocates denying the general public access to regulated small loans is an elitist and is out of touch with the real world of human economic activity in 21st century America. Without a doubt, that leader can legislatively force the small loan industry out of existence. But he cannot legislatively force the public demand for small loans out of existence. What will be the end result? Will the consumer demand be serviced via government subsidy? Or possibly by unregulated lending activity outside the pale? Or should the public demand be met through a regulated lending industry under laws that allow sufficient incentive to encourage legitimate businesses to provide service to the general public with the desired convenience, quality and quantity?

Henry Ruark June 20, 2007 10:09 am (Pacific time)

To all: Campaign to escalate interest rates at all such levels part of ongoing corporate campaign to take over control from democratically elected governance. Underway since Reagan days, headed by Norquist cabal, with huge results selling erroneous concept re "small government" and "kill all tax-rises" --via Norquist plan to "drag government into the bathtub and drown it."

Neal Feldman June 19, 2007 11:41 pm (Pacific time)

What ever happened to the old laws against usury which made something like any interest rate over 18% a crime? Remember the term loan shark?

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