The high interest rates once common among payday lenders are now gone since new regulations took effect last week. But gone, too, are many of the lenders.
The Oregonian reports that scores of Oregon payday and car title lenders have closed their doors as a 36 percent interest rate cap and other new regulations took effect.
At least 60 payday loan stores have closed or surrendered their licenses since June 1, says Charles Donald, supervising examiner at the Oregon Department of Consumer and Business Services.
Check 'n Go Inc., a payday lender based in Mason, Ohio, will close its 21 Oregon stores because of the new regulations, a spokesman said. Advance America, Cash Advance of Spartanburg, S.C., the nation's largest payday loan company, is evaluating whether it can keep its 45 Oregon stores open, said Jamie Fulmer, director of investor relations for the company.
Luanne Stoltz had two payday stores in Portland, but she has closed them both and says she doesn't know what she will do next.
"I'm out of business," she said.
Car title loans, which are similar to payday loans except they use car titles rather than the borrower's next paycheck as collateral, are also feeling the hit.
Northwestern Title Co., based near Atlanta, has stopped making car title loans in its 17 Oregon stores and is preparing to close those stores, said Ken Wayco, president.
Northwestern recently filed a lawsuit in Marion County Circuit Court challenging the constitutionality of the new law that caps interest at 36 percent for all consumer loans.
"Unless we prevail in the suit there, we're all out of business," Wayco said.
Still, more than 200 payday lenders are doing business, at least for now, under the Legislature's new regulations.
"It looks like some businesses are able to provide more affordable loans, and that sounds like a real win for the community and consumers," said Patty Wentz, spokeswoman for Our Oregon, a nonprofit progressive coalition that led the fight for laws regulating payday and car title lenders.
The new laws allow payday and car title lenders to charge an origination fee of $10 per $100 loaned, though no more than $30 for a loan of any amount. Loans must be for at least 31 days. Lenders can charge 36 percent annual interest, or about $3 per $100 in addition to the origination fee.
That means lenders can charge a total of $13 per $100, which amounts to an annual interest rate of about 154 percent for a 31-day loan.
The Oregon legislature passed the rules regulating the lending industry because borrowers sometimes became trapped by the high-interest loans, which they could repeatedly extend or roll over. Some called the company's lending practices predatory.
Payday lenders closing doors