So lawmakers legalized – and regulated – the payday loan industry in 1995

So lawmakers legalized – and regulated – the payday loan industry in 1995

“It was just a sham,” said Chuck Cross, director of the consumer services division of the state Department of Financial Institutions.

Two years ago, they changed the laws to give borrowers some additional protections, such as being able to rescind a loan free of charge within the first 24 hours. In exchange, the maximum loan was raised from $500 to $700.

Bassford testified in favor of those changes. And campaign finance records show that he’s also a prolific political donor. Over the past four years, he gave $3,250 to former Gov. Gary Locke, $2,750 to state Sen. Don Benton and $2,000 to Supreme Court Justice Jim Johnson. He’s donated a total of $30,025 to 17 political candidates since 2000.

State fields some complaints

In recent years, state regulators have slapped a few payday loan businesses. Cash USA and a Lacey firm called Expressit were doing unlicensed business, Cross said. Fast Cash Loans was licensed, but was charged late last year with overly aggressive collection methods from people whose checks bounced. According to a DFI report, the company’s “investigators” allegedly swore at borrowers, told them they’d lose custody of their children and told children their parents would go to jail. They allegedly routinely contacted a borrower’s family, landlord, neighbors and employers, called late at night, and sometimes called more than five times a day.

More than 53 people complained to DFI about Fast Cash Loans last year, Cross said. In response to the charges, the company told the Puget Sound Business Journal last year that its collectors had made errors, that it regretted any hurt feelings and that it was changing procedures.

Such cases are the exception in Washington. Most financial service complaints, Cross said, involve “sub-prime” mortgages for people with past credit problems. Payday lending, in fact, draws the second-fewest complaints of any financial service DFI regulates.

The proposals lawmakers are considering would cut the maximum loan from $700 to $500. One would restrict interest to 10 percent or a maximum of $25. Another would cap interest at 3 percent a month, or 36 percent a year.

But at just 3 percent a month, Dennis Bassford said, he could charge just $1.70 for a $100 loan for 17 days. That’s a recipe for going out of business, he said.

Washington’s $15 per $100 rate is “at the lower end of the spectrum” among the 36 states that allow payday loans, according to Carol Stewart, with Community Financial Services Association of America, a payday lender trade group based in South Carolina.

At the hearing, lawmakers seemed to have mixed feelings about clamping down on payday lenders. Several agreed that the best solution is probably better financial education in school. Others worried about where people desperate for cash would go.

In fact, John Bley https://paydayloansohio.net/cities/fairfield/, a financial consultant, said that the bills would cut payday lenders’ revenue by 30 percent to 80 percent

Rep. Dan Roach – who has received $2,250 in campaign contributions from the Bassfords over the past four years – said that the root of the problem is people spending more money than they make.

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Ten years ago, it was illegal in Washington for a lender other than a bank or credit card company to charge more than 12 percent annual interest. But small lenders found loopholes to circumvent the rules. Some would take a post-dated check, give back some money and “pay” the rest in largely worthless trading stamps, purportedly for gifts in a catalog.

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