In most cities in the northwest you’ll see them....storefronts that offer short-term, high interest loans. But Oregon this year passed a series of new restrictions on payday lenders.
Many in the industry said the laws would force them to close their doors. Now that the rules have been in place for more than two months, we sent Salem correspondent Chris Lehman to find out if the predictions came true.
|An empty Salem storefront housed a payday loan office until recently.|
Here’s what’s true about payday lenders in Oregon: A lot of them have gone out of business. In fact more than a hundred have closed their doors in the past two months.
This one here in south Salem was called Advance America. It’s an empty storefront now. In fact, the only way you can tell what used to be here is this note taped to the door. It says if you still have some payments to make you call somebody named Jeanine.
But payday lenders are still around. In fact, there’s about 200 of them still open statewide, and I wouldn’t have to drive far from here to find one...a mile into downtown Salem.
This place is called Pocket Money, and unlike Advance America, it’s locally owned. Manager Blanca Rogers says her business fills an important role in the community.
Blanca Rogers: “Our average customer gets paid once a month, and then start running out of money usually the third week, they need to come in and maybe borrow a hundred, two hundred, three hundred. It could be for school clothes, it could be maybe their car broke down, or senior citizens actually would come in and borrow money so they can pay for their medication.”
Rogers says the future is bleak for places like Pocket Money. The new laws have cut the amount of interest and fees they can charge. And that makes it tough to stay in business.
Blanca Rogers: “I think some of us are open right now, but that (doesn’t) mean it’s going to be open next year.”
But a group that fought payday lenders says it’s not as bad as the industry makes it out to be. Angela Martin is with Our Oregon.
Angela Martin: “They were howling that if we passed reasonable laws, they would put be out of business. They haven’t been. Lenders are still able to make a profit lending money to Oregonians at the rates that were set.”
Lenders dispute that. They’ve sued the state on the grounds that the new limits are unconstitutional.
So what are the new limits? Lawmakers set a cap of 36 percent for a one-month loan. That means if someone borrows a hundred dollars and pays it back on time, they’ll pay about three dollars in interest, plus a ten dollar loan fee.
Payday lenders say that’s not enough to make it worth staying in business. And they say if people don’t have the option of borrowing against their next paycheck, they’ll end up paying more in late fees and overdraft charges from banks.
Now payday lenders do provide other services, such as check cashing, for people who don’t use traditional banks. That’s what brought Rod Smith into Pocket Money.
Rod Smith: “They do a great job. There’s a lot of people out here because of problems they’ve had through life that they have no other way to cash their checks. Businesses don’t cash them anymore. They go to the bank they charge them or won’t cash them. I think it’s a great thing to have around here.”
But another customer, Richard Long, says he only stopped in to buy a money order. He says payday lenders should be avoided if at all possible.
Richard Long: “I think they kind of take advantage of a lot of people without means. They’re kind of put into a spot where they have to use this.”
Pocket Money manager Blanca Rogers says they don’t take advantage of people. She says most of their clients pay off their loan on time.
Blanca Rogers: “Most of this industry are not going to go and lend a customer such an outrageous amount that we could not get our money back because it’s not benefiting the customer and it’s definitely not benefiting us either.”
So what are some other options for people who need short term loans? Credit unions have stepped in to offer loans similar to what payday lenders offer. But you generally have to be a member of the credit union to qualify.
That means payday lenders will still play a role for people unwilling or unable to use a more traditional financial institution.