A few high-interest lenders are trying to hang onto a loophole in the state's payday loan regulations, Nevada Assembly Speaker Barbara Buckley told lawmakers Thursday.
Some high-interest lenders have evaded the 2005 payday loan law
and need to be stopped, said Buckley. She accuses them of changing
their contracts and continuing to charge interest rates up to 900 percent for a year or more. Under the 2005 law, lenders can charge
any rate for an initial period, but if a customer can't pay it back, the rate must drop.
Bob Ostrovsky, a lobbyist representing several high-interest lenders, said his clients shouldn't be regulated under the 2005 payday loan rules. The six companies he represents are "installment lenders" who use credit checks and don't take postdated checks, among other differences, he said.
Ostrovsky offered an amendment that would require his clients to follow some - but not all - of the payday loan regulations passed in 2005.
Buckley said those differences are immaterial, Ostrovsky's clients are dodging the law, and the Senate Commerce and Labor Committee should reject his amendment.
"This isn't about fair competition, this is about greed," said Buckley. "This is about putting people on a cycle of debt that they never get off. If we don't expand the law to those that take a check, it's pretty easy to see what everyone will do - no one will require a check and there will be nothing to stop those abuses."
The amendment to AB478 would limit fees, mandate disclosures and
require certain postings, but would not prevent high-interest lenders from charging high interest rates for as long as they want.
Buckley displayed a Handy Cash contract that matured after one year, requiring $1,602.60 payment on a $200 loan.
Lobbyists for those companies said customers typically avoid such high charges by prepaying the loans. They argued that they offered longer-term loans even before the 2005 law, and were offering a choice to consumers who often have nowhere else to turn.
"They said this bill would level the playing field," said Terry Graves, a lobbyist for lender Koster Financial. "Nothing could be further from the truth. It's starkly anti-competitive."
In previous hearings, judges testified that payday lenders have clogged state courts. Although judges often throw out egregious cases, the companies often engage in costly appeals. Almost 40 percent of civil cases in Reno's justice courts and 34 percent of such cases in Las Vegas' justice courts are brought by payday lenders.
AB478 was passed unanimously by the Assembly last month.
Several large payday lenders, including Seattle-based MoneyTree,
have supported Buckley's bill, saying it will provide for a level playing field and root out the industry's "bad actors."
Buckley said that while some payday loan locations are evading the law, about 500 are obeying it.
(Copyright 2007 by The Associated Press. All Rights Reserved.)