It seems like only yesterday a Portlander could find a short-term loan carrying an annual interest rate of 500 percent at any of the 346 payday-loan shops in Oregon, most located in the metro area.
But in 2007, then-House Speaker Jeff Merkley (D-Portland) pushed through legislation that all but ended the predatory payday-loan business in Oregon, saving consumers $165 million in interest and fees on money they have borrowed since then, according to a new report from Economic Fairness Oregon.
Merkley’s work is an example of how the Legislature can make a meaningful difference for consumers, especially those living close to the bone. Today’s legislators seem to lack the same nerve. This session, Democratic leaders are letting a bill die that would deal with another consumer concern: abusive practices by debt collectors.
As WW reported last month, debt collectors file tens of thousands of lawsuits in Oregon courts annually, many with missing or incorrect information (“The Enforcer,” WW, April 17, 2013).
In California, state Attorney General Kamala Harris, along with the Federal Trade Commission, is moving to stop debt buyers and collectors from filing such lawsuits. Harris sued JPMorgan Chase & Co. earlier this month for what she termed “frenzied” filings of more than 100,000 lawsuits, many of them bogus, over the past four years.
In Oregon, consumer advocates pushed House Bill 2826, which seeks to stop pernicious debt-collection practices, such as suing consumers without proper documentation. The House Consumer Protection and Government Efficiency Committee approved the bill last month.
But in April, House Speaker Tina Kotek (D-Portland) killed the bill by sending it not to the House floor but to the legislative boneyard of the House Rules Committee. Kotek spokesman Jared Mason-Gere says the speaker is committed to consumer protection but sidelined the bill because it lacked the votes to become law. “What we need next time is a more concerted effort,” Mason-Gere says.
Angela Martin, a lobbyist for Economic Fairness Oregon, a leading advocate for the reform of debt-collection abuses, says similar bills are getting knocked down around the country, but she had hoped Oregon could prove the exception. But House leadership told her to try again.
“They said we’re down a couple of votes and they can’t keep twisting arms on something that will fail in the Senate,” Martin says.
As if to remind legislators of their missed opportunity, Martin’s group on May 28 released “Payday Lenders Lose interest; Oregon Consumers Pocket Savings,” the first comprehensive report on just how effective Merkley’s 2007 legislation was in reining in payday loans.
Payday-loan shops offered short-term loans with steep interest rates and penalties. For many people, payday loans were like crack: The more they used, the more they needed. That’s because the three-digit annual interest rates and high fees meant borrowers needed to keep borrowing more and more just to stay current.
Merkley’s bill capped interest rates at 36 percent, limited loan fees and lengthened the minimum loan term to 31 days. Payday-loan businesses in Oregon shut down: As of last year, only 62 payday-loan shops were left, an 82 percent reduction.
In 2005, before the crackdown, payday lenders filed 3,500 lawsuits against Oregon borrowers, according to Economic Fairness Oregon. In 2011, there were 22.
On May 28, at a press conference celebrating the sixth anniversary of pay-day loan reform, Merkley said that effort was the culmination of nearly a decade of work.
“It became possible not only because of great advocacy work, but because I used my power as speaker to seize the moment,” he told WW.
Kotek spokesman Mason-Gere notes that the House this session passed a stronger foreclosure-mediation bill and a bill increasing regulation of insurers.
Mason-Gere says it took multiple sessions to pass payday-loan legislation. “A lot of it is visibility,” Mason-Gere says. “People could see payday lenders on their corners, and there was a lot more media coverage of that issue.”
But Oregon consumers understand the need for the protections that died with Kotek’s action. Martin’s group polled 500 Oregonians in mid-April and found strong support for tough regulation of debt-collection practices.
Democrats—who have already faced politically difficult votes this year, including on reform of the Public Employee Retirement System—don’t want to take on another issue that carries such high political risks.
Markee says the debt-collection bill was overly broad. “You try to identify a specific problem and then identify solutions,” he says. “I don’t think they did that.”
Martin says low-income Oregonians who are hurt by debt collectors have too few people speaking up for them, especially in the face of finance-industry lobbyists protecting the status quo.
“We are up against industry lobbyists with large checkbooks,” Martin says. “It takes a couple of sessions and a lot of work to raise the voices of poor people over those checkbooks.”