Payday loans in Oregon

Payday lending is a financial service with high fees that can place borrowers with no savings or available credit at risk of greater indebtedness and more long-term credit problems. It also can meet a need for those who have few or no other credit options.

Industry facts

• By 2003, the payday lending industry had grown to approximately 22,000 lending locations generating more than $40 billion in annual loan volume nationwide.
• In Oregon, the number of locations increased from 184 in 2001, when the "short-term personal loan license" was created, to 323 as of Dec. 31, 2004, and 360 as of Dec. 31, 2005.
• The dollar volume of payday loans in Oregon increased from $63.8 million in 1999 to $250 million in 2004.
  The number of Oregon payday loans extended annually increased from approximately 285,000 in 1999 to 747,542 in 2004.
• Charges or fees for these loans, when expressed as an Annual Percentage Rate (APR), can often exceed 500 percent.

Results of DCBS payday lending survey in 2004

• Payday lending is not used solely for meeting occasional short-term needs. The volume of rollover or renewal activity shows that payday lending creates excessive financial burdens.
• Payday lenders make millions of dollars available to consumers who may have few options stemming from their financial challenges.
• Loan proceeds are regularly used to pay bills, purchase gas, food or groceries, or provide cash flow for some emergent financial challenge.
• Fifty-nine percent of 1,221 borrowers took out five or more payday loans in the prior 12 months.
• Borrowers used payday loans because they: could not get a payday advance from their employers; could not borrow from family or friends; could not obtain short-term credit from a bank or credit union; and would pay more in overdraft and NSF fees to their traditional financial institutions.

Regulatory examinations results for 2005

Based on a sample of 30 of the 226 licensees examined in 2005, DCBS found the following:

• The fee to borrow $100 ranged from $15 to $21; the average fee charged was $18.83.
• Loan maturities ranged from seven days to 32 days; the average loan was 17.9 days.
• Loans to one borrower during the prior 12 months ranged from one to 27; the average was nine loans.
• Loans amounts ranged from $50 to $1,000; the average loan was $380.69.
• Borrowers’ loan-to-income ratio ranged from 1 percent to 69 percent; the average was 21 percent.
• The examiners reviewed 546 loans in the 30 offices, an average of 18 loans per office.