Oregon Moves to Close Loophole Allowing Out-of-State Lenders to Charge Interest Rates Above 36%
Despite no Republican support, House Bill 4116, a bill that seeks to close a loophole letting out-of-state lenders make loans to Oregonians at exorbitant interest rates, passed the House Committee on Commerce and Consumer Protection last Tuesday.
| Issue | What regulators say is happening | What HB 4116 does |
|---|---|---|
| Rate export loophole | Some loans to Oregonians priced above the state cap using out of state rules | Opts Oregon out of a federal interest export rule for consumer finance loans made in Oregon |
| Which loans | Consumer finance loans made to Oregon borrowers | Points consumer finance loans back to Oregon rate limits in ORS 725.340 |
| Timing | Enforcement actions continue under current law | Takes effect on the 91st day after session adjournment |
Lawmakers Move To Cap Oregon Interest Rates On Short-Term Loans From Any State
Currently, short-term lenders can charge interest based on the maximum allowable interest in their home state, despite a 2007 bill capping interest rates at 36% to curtail predatory lending.
Oregon’s Department of Consumer and Business Services indicated that five of the 190 licensed consumer finance companies in the state charge more than 36%.
The Department of Consumer and Business Services was made aware of 22,000 loans since 2020 made to Oregonians above the 36% cap.
Source: Oregon DCBS Division of Financial Regulation legislative testimony on high interest consumer loans (OLIS public testimony document)
Dailytidings.com
The House committee passed a bill that would more tightly enforce the state’s 36% interest rate cap on short-term consumer loans on a 6-4 party-line vote- no Republicans supported the bill.
The bill aims to shield Oregonians from loans with sky-high interest rates, but the bill’s opponents said it would limit options for borrowers during financial emergencies.
House Bill 4116 would close a loophole that allows out-of-state lenders make loans to Oregonians based on the maximum allowable interest in their home state. A similar bill that passed the House last year failed to pass the Senate.
Oregon’s ‘Rent-A-Bank’ Schemes Charging Up To 178% interest On Short-Term Loans
Oregon regulators recently described what they called a “rent-a-bank” lending, where borrowers charged interest rates as high as 126%-178% and ordered restitution.
DFR fined Wheels Financial Group LLC, doing business as LoanMart, $660,000 for charging excessive interest in consumer loans and also ordered the company to repay $900,000 to Oregon borrowers.
Source: Oregon DCBS Division of Financial Regulation press release on LoanMart rent a bank enforcement
Dailytidings.com
The DFR found that LoanMart was running a rent-a-bank arrangement and levied finance charges that ranged from 126 percent to 178 percent interest from 2019 to 2023. Their loan agreements also contained impermissible hold harmless clauses.
The fine was suspended and could be waived after three years.
The order applies equally to LoanMart’s affiliate, WFG Purchaser LLC.