Merkley Backs Cap on Consumer Loan Rates (VIDEO)

“Those lenders prey on the dire financial circumstances of some Oregonians to line their own pockets.”- House Speaker Jeff Merkley (D-Portland)

Photo by: Kevin Hays

(SALEM) - House Speaker Jeff Merkley (D-Portland) today encouraged his colleagues to enact a bill that would place a 36 percent annual interest rate cap on all consumer finance loans in Oregon.

Merkley is the chief sponsor of HB 2871, which closes loopholes in Oregon law that allow predatory lenders, such as payday loan shops and car title lenders, to avoid regulation and charge interest rates of up to 500 percent.

“There is no legitimate reason why a lender should charge $1000 interest on a $200 loan,” Merkley said. “Those lenders prey on the dire financial circumstances of some Oregonians to line their own pockets.”

Last spring during a special session of the Oregon legislature, the House and Senate passed a 36 percent annual interest rate cap on short-term payday loans. Almost immediately, those lenders began to reorganize under the state’s conventional lending laws to avoid that cap. A typical 60-day loan subject to the 36 percent cap could now be offered without that cap if the lenders simply converted it to term of 180 days or more.

“As soon as we passed the cap on payday lenders last year, they announced their intention to skirt the law by exploiting loopholes,” Merkley said. “It is time to close those loopholes for good.”

Oregon is currently one of only 16 states that current does not have a cap on consumer loans.

Oregon had a 36 percent cap on consumer loans until 1981 when the legislature lifted it. Since then predatory lenders have flourished. Across the country, states that had eliminated caps are reinstating them. Congress recently enacted a 36 percent cap on consumer loans to all active duty military members and their families, underscoring the problem nationwide.

“No state has been successful in capping interest and fees for only one type of lender without leaving huge loopholes that are immediately exploited,” Merkley said. “Our answer is to put a 36 percent cap on the whole consumer lending industry to make sure they can’t do that here.”

The 36 percent cap would not apply to all lenders in Oregon, only so-called non-depository lenders like payday loan shops and car title lenders. Banks and credit unions would not be affected, and Oregon pawn shops are already subject to a 36 percent cap.

House Bill 2871 is scheduled for a hearing today in the House Consumer Protection Committee.

Merkley will testify in support and encourage committee members to approve the measure.

WATCH THE STREAMING VIDEO CLIP COURTESY OF YOUTUBE AND OREGON LEGISLATIVE MEDIA