SENATE COMMITTEE ON COMMERCE

 

 

March 15, 2005                                                                                                       Hearing Room C

3:10 P.M.                                                                                                                     Tapes  35 - 38

 

MEMBERS PRESENT:         Sen. Floyd Prozanski, Chair

Sen. Roger Beyer, Vice-Chair

Sen. Ginny Burdick

Sen. Charlie Ringo

Sen. Doug Whitsett

 

STAFF PRESENT:                 Anna Braun, Committee Administrator

Karen Scoffield, Committee Assistant

 

MEASURES/ISSUES HEARD:        

                                                SB 545 – Public Hearing

                                                SB 634 – Public Hearing

                                                SB 968 – Public Hearing

 

These minutes are in compliance with Senate and House Rules.  Only text enclosed in quotation marks reports a speaker’s exact words.  For complete contents, please refer to the tapes.

 

TAPE/#

Speaker

Comments

TAPE 35, A

005

Chair Prozanski

Calls the meeting to order at 3:12 p.m.  Opens public hearing on SB 545 and SB 634.  Announces that SB 738 and SB 931 will not be heard today. Discusses procedures for the hearings.

SB 545, 634 – PUBLIC HEARING

045

Sen. Ryan Deckert

Senate District 14.  Discusses and submits written testimony in support of SB 545 (EXHIBIT A).  Introduces Rick Freed.

065

Rick Freed

Citizen, Portland, Oregon. Discusses and submits written testimony in support of SB 545 (EXHIBIT B).

095

Rep. Jackie Dingfelder

House District 45.  Discusses and submits written testimony in support of SB 545 (EXHIBIT C).

135

Sen. Whitsett

Discusses the need to differentiate between fees and interest rates.

145

Rep. Dingfelder

Responds.

150

Rep. Chuck Riley

House District 29.  Discusses and submits written testimony in support of SB 545 (EXHIBIT D).

180

Rep. Jeff Merkley

House District 47.  Testifies in support of SB 545.  Comments on the many payday loan companies located in his district.  Discusses a study on the interest rate of payday loans. 

235

Patti Whitney-Wise

Oregon Hunger Relief Task Force.  Discusses and submits written testimony in support of SB 545 (EXHIBIT E).

270

Angela Martin

Public Policy Advocate, Oregon Food Bank Regional.  Testifies in support of SB 545. Discusses the need to assist people who use payday loans.

320

Martin

Continues testimony.  Discusses current law regarding payday loans.  

355

Ellen Lowe

Legislative Advocate, Oregon Food Bank and Oregon Law Center.  Public Policy Counsel for United Way of the Columbia Willamette.  Testifies in support of SB 545.  Discusses the need of SB 545.

TAPE 36, A

015

Chair Prozanski

Asks Martin to provide information to the committee regarding payday loan practices of other states.  Asks the importance of changing the term in SB 545 to no less than thirty-one days.  Asks for information regarding the different rates available at payday loan locations possibly due to demographics or location.

035

Martin

Responds to Chair Prozanski’s questions.  Discusses the need of changing the term in SB 545 to thirty-one days. 

085

Reverend Daniel E. H. Bryant

President, Ecumenical Ministries of Oregon.  Discusses and submits written testimony in support of SB 545 (EXHIBIT F)

140

Pastor Thomas Dodd

Pastor, United Lutheran Church, Eugene, Oregon.  Discusses and submits written testimony in support of SB 545 (EXHIBIT G).  Discusses experience of a member of his congregation who took out two payday loans. 

190

Dodd

Remarks that he called payday loan companies in the Eugene area to obtain data and reports the interest rates provided to him.  Concludes testimony.

225

Cory Streisinger

Director, Department of Consumer and Business Services (DCBS)Discusses and submits written testimony in support of SB 545 (EXHIBIT H)

300

Streisinger

States that they have worked with Credit Unions to offer alternatives to payday loans.  Discusses support of SB 634.  

355

Sen. Whitsett

Comments that he has several questions and asks if there will be another hearing on the bills.

365

Chair Prozanski

Comments on the need of a work group and that there might not be another public hearing.

375

Sen. Whitsett

Asks in regard to SB 634 if DCBS requires credit card companies to consider if the consumer is able to repay the loan.

385

Streisinger

Responds that credit card companies are nationally regulated.

390

Sen. Whitsett

Remarks that the provision of good faith to be able to repay that is suggested in SB 634 is not on any credit card contract that he is aware of.

395

Streisinger

Responds.

405

Sen. Whitsett

Comments on section 3 of SB 545. Asks for clarification.

415

Streisinger

Responds.

420

Sen. Whitsett

Asks about loan practices regarding the regulation of interest rates.

425

Streisinger

Comments that they do not regulate interest rates for most types of financial industries in Oregon.

430

Floyd Lanter

Administrator, Division of Finance and Corporate Securities, DCBS. Responds to Sen. Whitsett’s questions.  Discusses practices of payday loan companies regarding default rates. 

TAPE 35, B

010

Sen. Whitsett

Asks what information is required by payday lenders to provide to customers before acquiring a payday loan.

020

Streisinger

Answers that payday loan companies are required to make available the brochure submitted in EXHIBIT H entitled “Payday Loans in Oregon.”  Comments that they are also required to make the same disclosures of any other lender due to the Federal Truth in Lending Act.

025

Sen. Whitsett

Asks what information is in the brochure in EXHIBIT H.

027

Streisinger

Comments that the brochure was drafted by DCBS and it is general consumer information.

030

Sen. Whitsett

Asks if the brochure contains Annual Percentage Rate (APR) information.

032

Streisinger

Responds that APR information is required under federal law to be disclosed.

034

Sen. Whitsett

Asks if there are any other disclosure requirements for payday loan lenders.

035

Lanter

Answers that they are required to post the APR for a typical loan.

040

Sen. Whitsett

Asks if the same disclosures would be on the paperwork also.

041

Lanter

Discusses requirements in loan documents.

044

Sen. Whitsett

Inquires how many payday loans are issued annually in Oregon.

047

Lanter

Responds. States that 677,000 payday loans were issued in Oregon in 2003. 

050

Sen. Whitsett

Inquires how many verifiable complaints DCBS received regarding payday loans.

052

Lanter

Remarks that they receive very few complaints as many people do not like to complain to their department.

055

Sen. Whitsett

Asks for the number of complaints.

057

Lanter

States that they received 16 complaints in 2004, no complaints in 2003 and less than 10 in the previous four years.

062

Chair Prozanski

Asks for status on a letter regarding challenging the authority of the rule making.

064

Streisinger

Responds that they have not made a challenge, but met with DCBS and gave them the legal opinion.

065

Chair Prozanski

Asks when it occurred.

067

Streisinger

States that it was September 2004.

068

Chair Prozanski

Comments on understanding of situation of the letter.

070

Streisinger

Responds.

072

Chair Prozanski

Inquires when the “Payday Loans in Oregon” brochure came about.

074

Streisinger

Responds that it was around January of 2005.

076

Lanter

Remarks that it is not a requirement for payday lenders to hand out the brochure, but just to make it available where payday loans are offered.

080

Chair Prozanski

Inquires if there is any requirement making payday lenders post information on where to go if customers have a complaint.

083

Lanter

Responds that the license issued to the payday lenders has a toll free number on it for DCBS and it is to be posted at the place of lending.

086

Streisinger

Comments that the brochure also advises individuals to contact DCBS.

088

Chair Prozanski

Asks if DCBS has seen a variance in interest rates within Oregon between different locations of payday loan companies.

090

Streisinger

Responds that they have not seen evidence of this.

095

Sen. Ringo

Asks the highest APR they have seen on payday loans.

100

Lanter

Responds.

105

Sen. Ringo

Asks if they have seen them as high as 700% or 800% APR.

107

Lanter

Responds that they typically range from 390% to 500% APR.  Remarks that most consumers look at the fee.  

111

Sen. Ringo

Asks how the APR correlates with the risk of the loan.

115

Lanter

Remarks that, based on the information he has seen, loss ratios typically run 20% of gross revenue. 

125

Sen. Ringo

Clarifies that the loss rate is less than a credit card company, yet the interest that payday lenders are charging is 10-30 times what a credit card company would charge.

129

Lanter

Agrees.

130

Sen. Ringo

Asks if Lanter sees justification why they need to charge an interest rate that high given the relatively low risk of the loan.

132

Lanter

Remarks that there is a considerable risk because the people obtaining loans are essentially writing a non-sufficient funds (NSF) check.

135

Streisinger

Comments that each loan is a transaction and there is a transaction cost associated with setting it up.

140

Sen. Ringo

Comments on the need to understand the correlation between the rate and the risk of a loan. 

143

Streisinger

Responds that it is a value judgment.  Comments that they do support the caps in SB 545.

150

Sen. Beyer

Inquires what the typical bank fee would be for a NSF check.

157

Lanter

Responds that banks charge from $20 to $30 per check. Comments that more costs could potentially be incurred from an NSF check than a payday loan.

167

Sen. Beyer

Asks if traditional financial institutions offer payday loans.

170

Lanter

Comments that a number of credit unions now offer these type of loans.

180

Chair Prozanski

Inquires if there was discussion with the industry about having a fixed dollar amount instead of an APR to make things more basic for consumers.

190

Lanter

Comments that this was discussed.

195

Sen. Whitsett

Comments on the confusion of the loss calculated by payday lenders.

205

Lanter

Responds.  Comments that the lenders calculate their loss or risk based on the revenue that they are generating. 

245

Annette Price

Community Financial Services Association of Oregon. Testifies in opposition to SB 545 and SB 634.  Submits 2,171 postcards on behalf of 2,171 citizens in Oregon in opposition to SB 545 and SB 634 (EXHIBIT I).  (Note: The same postcard was sent by all citizens.  See EXHIBIT I for a sample copy of the postcard).  Submits written testimony on behalf of Thom Shauklas, President, Community Financial Services Association of Oregon, regarding SB 545 (EXHIBIT J)

270

Luanne Stoltz

Owner, Anyday’s Payday.  Government Relations Chair, Community Financial Services Association of Oregon (CFSAO).  Discusses and submits written testimony in opposition to SB 545 (EXHIBIT K).

315

Mike Dewey

Consumer Lending Alliance.  Testifies in opposition to SB 545. Discusses interest rates and fees in commercial lending.  Submits an excerpt of conditions applicable to short-term personal loans (EXHIBIT L).

410

Dewey

Provides statistics of people who use payday loans.  Comments on locations of payday lending companies.  Summarizes and concludes.

TAPE 36, B

015

John Powell

Cottonwood Financial dba The Cash Store.  Testifies in opposition to SB 545.  Discusses the need of payday loans.  Comments that the thirty-one day loan period in SB 545 would increase defaults. 

040

Sen. Ringo

Inquires if other states have caps on payday loans.

045

Dewey

Responds that there are states that have caps.

047

Sen. Ringo

Remarks that his understanding is almost all states have caps and that Oregon is one of the few states that does not have a cap.  Asks why payday loan companies would not flourish if they had a cap like other states.

050

Dewey

Responds.

053

Sen. Ringo

Asks Stoltz if her sister who has three payday loan stores in Vancouver, Washington is still able to profit.

055

Stoltz

Responds.

057

Sen. Ringo

Remarks that if Washington is able to work under caps that Oregon should be able to also.

058

Dewey

Remarks that it would be problematic to lenders with lower volumes of loans.

060

Sen. Ringo

Discusses past usury laws in Oregon. Remarks that there should be some type of protection for the consumer.

065

Dewey

Agrees that we want to look for ways to protect consumers.  Comments on the need of disclosure.

082

Sen. Ringo

Agrees that you have to pick a line that is arbitrary.

085

Powell

Comments on the disclosure of payday loans to other types of loans.

090

Sen. Ringo

Asks Powell why Oregon wouldn’t be able to operate under caps if other states are able to.

095

Powell

Answers that high volume lenders would operate under certain cap levels in Oregon, but the industry as a whole would not operate.

100

Sen. Beyer

Asks Dewey what the rate would be if you calculated fees charged at automated teller machines (ATM).

105

Dewey

Offers to calculate the rate.  Comments on the need of payday lenders to be competitive in the market place.

115

Sen. Beyer

Asks Stoltz to describe a typical payday loan transaction at her store.

125

Stoltz

Discusses procedures. 

145

Sen. Beyer

Asks if there is anything to prevent customers from going from store to store and taking out more loans.

155

Stoltz

Responds that currently there are no restrictions on using other stores, but it is not to her advantage to loan to a customer who has loans at other stores.

162

Sen. Beyer

Responds that it may be to a lender’s advantage to offer a lower interest rate to avoid a customer going to another lender.

165

Stoltz

Responds.

167

Chair Prozanski

Asks how much business goes across the border from Oregon into Washington of customers looking for a lower fee.

177

Stoltz

Responds.

183

Sen. Whitsett

Asks Price for information on payday loan stores in Oregon.

188

Price

Answers that there are approximately 365 payday loan stores in Oregon.

192

Stoltz

Estimates there are 3-4 employees per store in response to Sen. Whitsett’s question.

195

Sen. Whitsett

Asks for a rough pay scale for payday loan employees.

200

Stoltz

Responds.

210

Pamela Leavitt

Credit Union Association.  Discusses and submits written testimony with a neutral position to SB 545 (EXHIBIT M).

220

Chair Prozanski

Clarifies what Leavitt is referring to when she says “members.”

225

Leavitt

Answers, members of the credit unions.  Continues testimony.

280

Sen. Burdick

Comments that the fees seem to be comparable to what payday loan companies charge.

285

Leavitt

Responds.

295

Sen. Burdick

Comments that although the interest rate seems reasonable the fee is high.

300

Leavitt

Remarks that her information is only for a portion of the loans and not a summary.  

307

Sen. Whitsett

Asks if the rate is an annualized rate.

309

Leavitt

Answers, yes.

312

Lori McNew

Citizen, Oregon.  Discusses experience of son who obtained a payday loan.  Discusses and submits written testimony in support of SB 545 (EXHIBIT N).

345

Marilyn Read

St. Luke Lutheran Church.  Submits written testimony on behalf of Reverend David A. Knapp (EXHIBIT O).  Testifies in support of SB 545.

415

James Hunt

Member, Social Justice Commission, Catholic Parish of St. Paul, Silverton, Oregon.  Testifies in support of SB 545.

TAPE 37, A

035

Hunt

Concludes testimony.

060

Norene Goplen

Director, Lutheran Advocacy Ministry of Oregon.  Discusses and submits written testimony in support of SB 545 (EXHIBIT P).

125

Gloria Colvin

Executive Director, Fish Emergency Service, Inc.  Discusses and submits written testimony in support of SB 545 (EXHIBIT Q).  Discusses confusion between fees and interest rates.

185

Chair Prozanski

Recesses public hearing on SB 545 and SB 634. Opens public hearing on SB 968. 

SB 968 – PUBLIC HEARING

205

Rep. Jackie Dingfelder

House District 45.  Discusses and submits written testimony (EXHIBIT R) and a fact sheet on refund anticipation loans (EXHIBIT S) in support of SB 968.  Comments that amendments are being drafted and notes appreciation of the cooperation of H&R Block.

300

Chair Prozanski

Asks if Art Chartrand would like to testify on SB 935 as he has traveled more than 100 miles.

305

Art Chartrand

Remarks that he would like to come back to testify when other individuals testify.

310

Chair Prozanski

States that SB 935 will be rescheduled.

320

Rep. Dingfelder

Adds that there is a bill in congress currently regarding refund anticipation loans (RAL). 

335

Phillip Kennedy – Wong

Ecumenical Ministries of Oregon (EMO).  Testifies in support of SB 968. Submits written testimony on behalf of Rina Kotek, Policy Director, Children First for Oregon (EXHIBIT T).

420

Rep. Dingfelder

Mentions pg. 3-6 of EXHIBIT T showing data on Federal Tax Returns claiming the Earned Income Tax Credit in Oregon.

TAPE 38, A

020

Chair Prozanski

Announces that SB 573 will be rescheduled.

030

Sybil Hebb

Legislative Advocate, Oregon Law Center.  Discusses and submits written testimony in support of SB 968 (EXHIBIT U).

082

Floyd Lanter

Administrator, Division of Finance and Corporate Securities, Department of Consumer and Business Services (DCBS).  Discusses and submits written testimony in neutrality to SB 968 (EXHIBIT V).

115

Sen. Beyer

Inquires regarding figures provided in Lanter’s testimony.

123

Lanter

Remarks that he provided Rep. Dingfelder the information she provided the committee.  Discusses statistics.

130

Sen. Beyer

Discusses discrepancy between Rep. Dingfelder’s statistics and Lanter’s statistics.

132

Lanter

Offers to look into the discrepancy and return the information.

160

Matt Markee

H&R Block. Introduces and defers to Jim Hintz and Bob Weinberger.

165

Bob Weinberger

Vice President, Government Relations, H&R Block.  Discusses and submits an informational packet in opposition to SB 968 (EXHIBIT W).

230

Weinberger

Discusses procedures of the tax preparation process.  Discusses procedures in a tax refund anticipation loan. 

280

Weinberger

Discusses disclosure procedures.  Summarizes and concludes testimony.

330

Jim Hintz

H&R Block, Oregon.  Offers to answer questions from the committee.

335

Tom Echols

Regional Director, Government Relations, HSBC Taxpayer Financial Services. States that HSBC is H&R Block’s national partner on refund anticipation loans.  Testifies in opposition to SB 968.  Remarks that refund anticipation loans are driven by customer demand.

375

Sen. Beyer

Asks for number of customers who do not have bank accounts.

380

Weinberger

Responds that approximately 48% of refund anticipation loan clients do not have a checking account.

382

Sen. Beyer

Asks where these people go to cash their refund checks.

384

Weinberger

Responds.

TAPE 37, B

005

Sen. Beyer

Inquires regarding fees associated with cashing United States treasury checks without a checking account.

013

Weinberger

Discusses fees.

015

Sen. Beyer

Remarks that it can be cheaper to obtain a refund anticipation loan than to pay a 3-6% fee to cash a refund check.

020

Weinberger

Responds that the costs saved may make refund anticipation loans more desirable.

025

Chair Prozanski

Inquires if there is a way for H&R Block to cash refund anticipation loans.

030

Weinberger

Answers that H&R Block is not allowed to cash Internal Revenue Service (IRS) checks.

031

Echols

Comments that they cannot have checks mailed to them either and that they have to be mailed to the taxpayer.

032

Chair Prozanski

Discusses understanding.

033

Weinberger

Responds.

035

Chair Prozanski

Inquires how much business H&R Block does in Oregon as far as market share.

040

Hintz

Responds that he does not know for sure.

041

Chair Prozanski

Inquires regarding regulations in Oregon.

046

Weinberger

Responds that there is extensive federal regulation.  Remarks that some of the items in the SB 968 are already covered by federal law.

063

Chair Prozanski

Asks Weinberger to point out in SB 968 what is covered under federal law. Asks if Weinberger has a problem with the language of SB 968 regarding notification.

090

Weinberger

Responds that their preference is a uniform national standard, but they want to assist the committee in their needs.

The following is submitted for the record without public testimony:

 

Rick Bennett

Associate State Director for Advocacy, AARP Oregon.  Submits written testimony in support of SB 968 (EXHIBIT X).

 

Justin M. Baxter

Attorney, Baxter & Baxter, LLP.  Submits written testimony in support of SB 968 (EXHIBIT Y).

 

Patti Whitney-Wise

Oregon Hunger Relief Task Force.  Submits written testimony in support of SB 968 (EXHIBIT Z).

100

Chair Prozanski

Closes public hearing on SB 968.  Reopens public hearing on SB 545 and 634.

SB 545, 634 – PUBLIC HEARING

110

Jim Gardner

Cottonwood Financial dba The Cash Store.  Turns time over to Annette Price to testify first.

113

Annette Price

Community Financial Services of Oregon.  Discusses and submits written testimony in opposition to SB 634 (EXHIBIT AA).

130

Jim Gardner

Discusses and submits informational packet of a recap of the history of SB 159 (2003) in opposition to SB 634 (EXHIBIT BB)

172

John Powell

Cottonwood Financial dba The Cash Store.  Discusses the difference between secured and unsecured loans.

220

Jim Markee

Community Loans of America.  Comments on the excellent work of the Department of Consumer and Business Services (DCBS).  Testifies in opposition to SB 634. 

290

Sen. Beyer

Remarks that they have been asked several times this session to put into statute what is currently being done by rule by many departments.

300

Markee

Comments that DCBS is not normally in this type of situation.

310

Chair Prozanski

Remarks that DCBS is trying to incorporate unsecured loans into the same statutes that are already in place for secured loans.  Discusses the difference of the standard between secured and unsecured loans. Comments on the need to inform the public. 

355

Markee

Responds.  Comments that the lending process is between the lenders and the borrowers and that proposed legislation is an attempt to replace the judgment of the lender or the borrower with someone else’s judgment. 

405

Gardner

Responds to Chair Prozanski’s comments.

TAPE 38, B

010

Chair Prozanski

Discusses the legislature’s duty to set public policy.  Remarks that Oregon does not have usury laws. 

040

Anna Braun

Committee Administrator.  Submits an article on behalf of Troy May regarding SB 545 (EXHIBIT CC).

 

The following is submitted for the record without public testimony:

 

Paul Rainey

NW Public Affairs, LLC.  Submits written testimony on behalf of the Community Action Directors of Oregon (CADO) in support of SB 545 (EXHIBIT DD)

 

Justin M. Baxter

Attorney, Baxter & Baxter, LLP.  Submits written testimony in support of SB 545 and SB 634 (EXHIBIT Y).

 

Robert J. Castagna

Oregon Catholic Conference.  Submits written testimony in support of SB 545 (EXHIBIT EE).

 

Rick Bennett

AARP Oregon.  Submits written testimony in support of SB 545 (EXHIBIT FF).

 

Rep. Carolyn Tomei

House District 41.  Submits written testimony in support of SB 545 (EXHIBIT GG).

035

Chair Prozanski

Closes public hearing on SB 545 and SB 634 and adjourns the meeting at 6:28 p.m.

 

EXHIBIT SUMMARY

 

  1. SB 545, written testimony, Sen. Ryan Deckert, 1 p
  2. SB 545, written testimony, Rick Freed, 1 p
  3. SB 545, written testimony, Rep. Jackie Dingfelder, 1 p
  4. SB 545, written testimony, Rep. Chuck Riley, 1 p
  5. SB 545, written testimony, Patti Whitney-Wise, 1 p
  6. SB 545, written testimony, Daniel E.H. Bryant, 2 p
  7. SB 545, written testimony, Thomas Dodd, 2 pp
  8. SB 545, SB 634, written testimony, Cory Streisinger, 24 pp
  9. SB 545, SB 634, postcards, Annette Price, 1 p
  10. SB 545, written testimony of Thom Skauklas, Annette Price, 1 p
  11. SB 545, written testimony, Luanne Stoltz, 2 pp
  12. SB 545, excerpt, Mike Dewey, 4 pp
  13. SB 545, written testimony, Pamela Leavitt, 7 pp
  14. SB 545, written testimony, Lori McNew, 1 p
  15. SB 545, written testimony of Rev. David A. Knapp, Marilyn Read, 5 pp
  16. SB 545, written testimony, Norene Goplen, 2 pp
  17. SB 545, written testimony, Gloria Colvin, 2 pp
  18. SB 968, written testimony, Rep. Jackie Dingfelder, 2 pp
  19. SB 968, fact sheet, Rep. Jackie Dingfelder, 1 p
  20. SB 968, written testimony of Tina Kotek, Phillip Kennedy – Wong, 6 pp
  21. SB 968, written testimony, Sybil Hebb, 2 pp
  22. SB 968, written testimony, Floyd Lanter, 4 pp
  23. SB 968, informational packet, Bob Weinberger, 23 pp
  24. SB 968, written testimony, Rick Bennett, 1 p
  25. SB 968, SB 545, SB 634, written testimony, Justin M. Baxter, 2 pp
  26. SB 968, written testimony, Patti Whitney-Wise, 1 p

AA. SB 634, written testimony, Annette Price, 2 pp

BB. SB 634, informational packet, Jim Gardner, 3 pp

CC. SB 545, article by Troy May, staff, 1 p

DD. SB 545, written testimony, Paul Rainey, 1 p

EE. SB 545, written testimony, Robert J. Castagna, 2 pp

FF. SB 545, written testimony, Rick Bennett, 1 p

GG. SB 545, written testimony, Rep. Carolyn Tomei, 1 p