SALEM, Ore. (AP) ?” After pushing unsuccessfully for years for tougher restrictions on short-term “payday” loans, consumer activists are on the brink of winning a victory in this week’s special session of the Oregon Legislature.
Oregon now is only one of seven states with no interest cap on payday loans, but legislators this week are expected to pass a new state law limiting interest to 36 percent a year and enacting other consumer protections for borrowers of payday loans.
The special session, set to begin Thursday, initially was called by Gov. Ted Kulongoski to funnel more state aid to struggling school districts and to plug a $136 million budget hole in Oregon’s health and human services programs.
However, House and Senate leaders decided there was enough bipartisan support surrounding the payday loans issue to add it to the agenda for this week’s special session.
The payday loan industry has been growing rapidly in Oregon to satisfy the public’s demand for short-term loans. But consumer advocates say a new state law is needed to protect people from lenders who at times charge more than 500 percent interest.
The last time the Legislature met, in the regular 2005 session, a bill to limit interest rates on payday loans was approved by the Democrat-controlled Senate but died in the Republican-controlled House.
That measure was shelved by a House committee chairman who was angry about insinuations by a campaign finance watchdog group that House Speaker Karen Minnis and other GOP lawmakers had been bought off with campaign contributions from the payday loan industry.
The payday loan dispute has become an issue in Minnis’s re-election campaign, with her Democratic challenger for the seat, Rob Brading, championing payday reform in the House speaker’s east Multnomah County district.
A spokesman for Minnis on Tuesday played down the re-election issue and said Minnis has cleared the way for a bill to pass in the special session because some places, such as Portland and Gresham, are moving to pass local ordinances clamping down on payday loans.
“She feels it would be better to enact strong consumer protections on a consistent, statewide basis,” spokesman Chuck Deister said.
Whatever the reason, a leading backer of payday loan reform applauded Minnis’ “welcome change of heart” on the issue.
“We’re delighted that the Legislature is serious about passing a real payday loan reform law,” said Patty Wentz of the Our Oregon coalition.
The coalition had planned to join with community activists, union leaders and church groups to work for passage of a ballot measure this fall to clamp a limit on interest rates charged for payday loans.
That campaign will be put on hold if the Legislature passes the payday loans bill this week, Wentz said.
“It will save us hundreds of thousands of dollars, and thousands of volunteer hours” that otherwise would have been devoted to ballot measure campaign, she said.