Thursday, June 7, 2007

The usury suspects

Here's a piece of good news:

Today the Oregon Senate approved a cap on all consumer loans under $50,000 at 30 points above the Fed Reserve's discount rate. It's already approved by the House with a minor difference to be ironed out before the Governor signs the bill and it goes into effect on July 1.

"Oregon families can breathe easier today," announced OR House Speaker Jeff Merkley in a media release, adding, in a somewhat tortured figure of speech, "The days of triple-digit interest rates on short-term loans are now numbered."

Not everyone greeted the news that Oregon consumers won't be lured into short-term loans at 528% interest with Merkley's enthusiasm, though:
The legislation will knock out all but about 20 of the 333 payday lending stores in Oregon, said Steven Hanson, president of Oak Brook Financial Corp., which operates 41 payday loan stores in Oregon.

"These politicians don't care about the small Oregon business owners and their employees who are going to be on the street," he said. "They ought to care about the consumers."

Yes, and the chains and manacles industry went into something of a slump after the Emancipation Proclamation, too, but everyone managed to get through it. And at least if Hanson's employees find themselves temporarily tapped out and go looking for a short-term loan to hold them over, they won't have to dodge come-ons from the shops that want 500% interest.

For several years, in fact, Oregon's "community charter" credit unions (the ones that serve a particular community rather than a particular membership group) have been offering payday loans--typically with consumer-protection measures like limits on the number of times a loan can be rolled over, limits on fees and interest, and limits on loan amount relative to the consumer's income level.

(Hanson's own regard for consumers--to the extent that he pulls them into small claims court at the rate of three per day--is itself the stuff of legend.)

The Oregonian's account added:
During a 40-minute debate over the usury bill on the Senate floor Wednesday, Republican opponents argued that the measure invited legal challenges, distorted market forces and unfairly singled out consumer lenders by not addressing fees charged by banks and credit unions.

"Let the market work," said Sen. Roger Beyer, R-Molalla.

So you can add that to your Republican lexicon: What the New Testament calls "usury," the Senate Republicans call "the undistorted free market at work." Hope that clears things up.


Samuel John Klein Portlandiensis said...

As far as I'm concerned, any loan business that can't get by unless they're charging more than 36 per cent (taking the Leg's limit as, for argument's sake, the definition of "reasonable") for a loan doesn't deserve to be in business anyway.

The "what about the poor who can't get loans" (there are credit unions who will do it) and "what about our poor workers who will be out of work soon" (they likely didn't care jack about them until they could pay lip service to them as they begged for respect in the media) arguments as well as the mendacious commercials that were running on the radio were really starting to make my blood boil.

I'm thankful someone had at least an ounce of guts on this issue. It was too long in coming.

Nothstine said...

SJK: Thanks for reminding me about those radio [and TV] spots. They really are odious, aren't they? Imagine a cheery upbeat jingle and cheery upbeat people [women and men, young and old, all colors] encouraging you to stick your arm in a bear trap.


Samuel John Klein Portlandiensis said...

Imagine a cheery upbeat jingle and cheery upbeat people [women and men, young and old, all colors] encouraging you to stick your arm in a bear trap.

Oh, now you've done it. You had to say it out loud, didn't you?

I expect this commercial to air Any Day Now.

Palease said...

With this issue, like with global warming, people are sorely mistaken that government action will actually accomplish a solution. Did the formation of homeland securtiy make the world safer? Ask New Orleans. So why all this hubris and applause for government intervention now that interest rates are capped at 30%?

There is a caste of people in america where a $200 loan can mean the difference between getting by or getting put on the street. All of a sudden a bit of concern is cast on them by the Senate—made up of people where $200 won't even get you a dinner plate to their re-elction campaign. Now they're guardians of the poor.

I highly doubt there will be any follow-up efforts to provide alternatives for the demand for capital by our nation's poor. Why? because there are none. After they cap their options here, it's back to business as usual.