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Roseburg business: A man walks by the Fast Check sign on Stephens Street in Roseburg on Thursday. Payday loan businesses are on the rise in Oregon, with some consumer groups and state politicians questioning their rates.
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ENLARGE
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Business owner: Jerry Morrow sits in his office at Douglas
County Check Cash/Advance on Thursday. Morrow and his wife make up the ownership and employee base for the family-owned business.
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Jerry Morrow saw a need in Douglas County and decided to start a local business to meet it.
Douglas County Check Cash/Advance opened in August in Roseburg. It's one of around 10 such businesses in the area.
"I saw the potential in it," Morrow said. "There's a need in this community to provide a short-term loan at a reasonable rate."
Those rates -- and how reasonable they are -- have come under fire by consumer groups and been questioned by government officials.
A state senate bill aimed at regulating the industry didn't pass the Legislature earlier this year. State Sen. Floyd Prozanski, D-Eugene, whose District 4 covers North Douglas County, introduced the bill.
"I'm for the capitalist system of allowing businesses to open and close ... but this is one that has very, very little, if any, regulatory system," he said.
The Oregon Student Public Interest Research Group released a report in November focused on payday loan businesses in Portland. Its title was "Preying on Portlanders."
The report uses words like "predatory," "abusive" and "trap" to describe the payday loan industry.
Those words don't sit well with Morrow. He said if they were accurate, the industry couldn't survive.
"We'd be out of business, because we wouldn't get the customers," he said.
Those customers aren't always what people imagine, either, Morrow said. They are often just in a position where their car breaks down or they have medical bills to pay, he said, and they need a quick fix.
Morgan Wright of Roseburg has been in that position and turned to a payday lender. "I needed to put a deposit down on a house and I really wanted the house," she said. "It was a situation if I didn't have the money for it, then I could have lost it to somebody else."
COMPARING RATES
Critics of payday loan businesses say annual percentage rates that approach, and sometimes exceed, 500 percent are too high.
Wright, who works full time at a local wholesale distributor, said she likely wouldn't use a payday loan service again, because of the fees involved. In a bind, however, she considered it a worthwhile service.
Morrow said compared to the alternatives for many people, the rates of payday lenders are a deal.
"Not only am I cheaper than bouncing a check ... bad checks end up hurting your credit," he said.
He points to a 2001 study done by the Credit Research Center at the McDonough School of Business at Georgetown University. It states payday advance fees are lower than many alternatives.
The study showed that a $100 bounced check with a $25 bank fee and $25 merchant fee would have an APR of 1,303 percent. A standard $29 late fee on a $100 credit card payment, on a 30-day term, would have an APR of 771 percent.
Morrow even looks at the fees charged by automated teller machines. He said using an ATM to withdraw $100 for a bank that he doesn't belong to would equal an interest rate of more than 500 percent -- "that they're charging you to use your own money," he said.
If a customer even pays a $1 fee to withdraw $100, the APR would equate to 365 percent.
Advance America, with 2,500 locations in the U.S, claims to be the largest payday cash advance company in the country. It is a publicly traded business with three Douglas County locations.
Its Web site lists an APR, assuming a 14-day loan is taken, of 469.29 percent for loans from $100 to $700 in Oregon. That's an $18 fee for a $100, two-week loan. A $700 loan has a $126 fee.
What worries Prozanski is when the loan rolls over, or can't be paid on time. When a loan rolls over, he said, a borrower typically has to repay the interest only to get another loan, while taking on another fee.
Douglas County Check Cash/Advance opened in August in Roseburg. It's one of around 10 such businesses in the area.
"I saw the potential in it," Morrow said. "There's a need in this community to provide a short-term loan at a reasonable rate."
Those rates -- and how reasonable they are -- have come under fire by consumer groups and been questioned by government officials.
A state senate bill aimed at regulating the industry didn't pass the Legislature earlier this year. State Sen. Floyd Prozanski, D-Eugene, whose District 4 covers North Douglas County, introduced the bill.
"I'm for the capitalist system of allowing businesses to open and close ... but this is one that has very, very little, if any, regulatory system," he said.
The Oregon Student Public Interest Research Group released a report in November focused on payday loan businesses in Portland. Its title was "Preying on Portlanders."
The report uses words like "predatory," "abusive" and "trap" to describe the payday loan industry.
Those words don't sit well with Morrow. He said if they were accurate, the industry couldn't survive.
"We'd be out of business, because we wouldn't get the customers," he said.
Those customers aren't always what people imagine, either, Morrow said. They are often just in a position where their car breaks down or they have medical bills to pay, he said, and they need a quick fix.
Morgan Wright of Roseburg has been in that position and turned to a payday lender. "I needed to put a deposit down on a house and I really wanted the house," she said. "It was a situation if I didn't have the money for it, then I could have lost it to somebody else."
COMPARING RATES
Critics of payday loan businesses say annual percentage rates that approach, and sometimes exceed, 500 percent are too high.
Wright, who works full time at a local wholesale distributor, said she likely wouldn't use a payday loan service again, because of the fees involved. In a bind, however, she considered it a worthwhile service.
Morrow said compared to the alternatives for many people, the rates of payday lenders are a deal.
"Not only am I cheaper than bouncing a check ... bad checks end up hurting your credit," he said.
He points to a 2001 study done by the Credit Research Center at the McDonough School of Business at Georgetown University. It states payday advance fees are lower than many alternatives.
The study showed that a $100 bounced check with a $25 bank fee and $25 merchant fee would have an APR of 1,303 percent. A standard $29 late fee on a $100 credit card payment, on a 30-day term, would have an APR of 771 percent.
Morrow even looks at the fees charged by automated teller machines. He said using an ATM to withdraw $100 for a bank that he doesn't belong to would equal an interest rate of more than 500 percent -- "that they're charging you to use your own money," he said.
If a customer even pays a $1 fee to withdraw $100, the APR would equate to 365 percent.
Advance America, with 2,500 locations in the U.S, claims to be the largest payday cash advance company in the country. It is a publicly traded business with three Douglas County locations.
Its Web site lists an APR, assuming a 14-day loan is taken, of 469.29 percent for loans from $100 to $700 in Oregon. That's an $18 fee for a $100, two-week loan. A $700 loan has a $126 fee.
What worries Prozanski is when the loan rolls over, or can't be paid on time. When a loan rolls over, he said, a borrower typically has to repay the interest only to get another loan, while taking on another fee.
Prozanski said a law should dictate that part of the principal be paid before a rollover can occur.
"I believe that we need to look at putting some reasonable, sensible regulations in place," he said.
LEGISLATIVE ACTION
The Prozanski-introduced bill that failed to pass the Oregon Legislature this year would have put a 15 percent cap on short-term loans.
The Oregon Food Bank was a lobbyist for the bill, but Prozanski said the payday loan industry has a "very, very strong lobby."
"They basically shut it down," he said.
His goal is not to shut down the industry. In fact, he said the bill was "very business friendly."
Payday loan businesses in other states that have caps on interest rates are surviving, Prozanski said. He cited Washington, which has a 15 percent cap on the first $500 borrowed and 10 percent above $500, according to Washington's Department of Financial Institutions.
"It wasn't something that hampered business," Prozanski said. "It just made things reasonable and equitable for everyone that wanted to use that service."
Another committee will be meeting on the topic, Prozanski said, and he's hopeful to have hearings in the new year and new legislation drafted by September.
Morrow said he doesn't understand why it's necessary.
Setting a standard interest rate would hurt competition, he said. It would also hurt the locally owned businesses, like his, Morrow said, that don't have a corporate headquarters to offset costs.
Morrow did not want to state his loan fees for this article, in fear competitors could undercut them.
"They don't trust the common man to make an intelligent decision," he said of government officials.
"I hate to say it, but this is America," he continued. "There has to be competition for the system to work."
'LOOK AT YOUR OWN SITUATION'
Banks and other financial institutions don't typically provide direct competition to payday lenders.
An exceptionally short-term loan at Umpqua Bank, for example, would be an "unusual circumstance," according to Scott Hall, Umpqua Bank's chief lending officer, based in Roseburg.
"We don't have a loan product that is a 14-day, for example," he said.
Hall said Umpqua Bank uses the Wall Street Journal's prime rate for determining interest rates for consumers.
The prime rate changes as the nation's 30 largest banks make changes, he said. It's commonly used by many financial institutions.
The rate charged to consumers changes based on an individual's risk. That risk is weighed on many factors, including how established a borrower's income is, how strong their income is compared to debt payments, and credit history.
That hasn't historically been evaluated as much by payday lenders, according to Linda Smith, Consumer Credit Counseling Service's director in Roseburg.
She said people first started coming to the nonprofit credit counseling service with payday loan problems in 2000. The number of people turning to the service has grown ever since.
The reason seems clear to Smith.
"There's just more opportunity for people to get to them," she said. "And there are more opportunities for people to go to one and then to another."
Morrow said he believes the community can support the current number of payday loan businesses in the community. At the same time, he said, "I don't think any of us are getting rich."
Whether rich or not, Smith's advice for any person considering a short-term loan is to take a good, long look at their financial situation, as well as the loan.
"It just comes down to, look at your own situation and what your realistic ability to repay that payday loan is," she said.
* You can reach reporter Paul Craig at 957-4211 or by e-mail at pcraig@newsreview.info.
"I believe that we need to look at putting some reasonable, sensible regulations in place," he said.
LEGISLATIVE ACTION
The Prozanski-introduced bill that failed to pass the Oregon Legislature this year would have put a 15 percent cap on short-term loans.
The Oregon Food Bank was a lobbyist for the bill, but Prozanski said the payday loan industry has a "very, very strong lobby."
"They basically shut it down," he said.
His goal is not to shut down the industry. In fact, he said the bill was "very business friendly."
Payday loan businesses in other states that have caps on interest rates are surviving, Prozanski said. He cited Washington, which has a 15 percent cap on the first $500 borrowed and 10 percent above $500, according to Washington's Department of Financial Institutions.
"It wasn't something that hampered business," Prozanski said. "It just made things reasonable and equitable for everyone that wanted to use that service."
Another committee will be meeting on the topic, Prozanski said, and he's hopeful to have hearings in the new year and new legislation drafted by September.
Morrow said he doesn't understand why it's necessary.
Setting a standard interest rate would hurt competition, he said. It would also hurt the locally owned businesses, like his, Morrow said, that don't have a corporate headquarters to offset costs.
Morrow did not want to state his loan fees for this article, in fear competitors could undercut them.
"They don't trust the common man to make an intelligent decision," he said of government officials.
"I hate to say it, but this is America," he continued. "There has to be competition for the system to work."
'LOOK AT YOUR OWN SITUATION'
Banks and other financial institutions don't typically provide direct competition to payday lenders.
An exceptionally short-term loan at Umpqua Bank, for example, would be an "unusual circumstance," according to Scott Hall, Umpqua Bank's chief lending officer, based in Roseburg.
"We don't have a loan product that is a 14-day, for example," he said.
Hall said Umpqua Bank uses the Wall Street Journal's prime rate for determining interest rates for consumers.
The prime rate changes as the nation's 30 largest banks make changes, he said. It's commonly used by many financial institutions.
The rate charged to consumers changes based on an individual's risk. That risk is weighed on many factors, including how established a borrower's income is, how strong their income is compared to debt payments, and credit history.
That hasn't historically been evaluated as much by payday lenders, according to Linda Smith, Consumer Credit Counseling Service's director in Roseburg.
She said people first started coming to the nonprofit credit counseling service with payday loan problems in 2000. The number of people turning to the service has grown ever since.
The reason seems clear to Smith.
"There's just more opportunity for people to get to them," she said. "And there are more opportunities for people to go to one and then to another."
Morrow said he believes the community can support the current number of payday loan businesses in the community. At the same time, he said, "I don't think any of us are getting rich."
Whether rich or not, Smith's advice for any person considering a short-term loan is to take a good, long look at their financial situation, as well as the loan.
"It just comes down to, look at your own situation and what your realistic ability to repay that payday loan is," she said.
* You can reach reporter Paul Craig at 957-4211 or by e-mail at pcraig@newsreview.info.
