Oklahoma Bill Focuses on 'Payday' Loan Industry

By Jim Stafford, The Daily Oklahoman Knight Ridder/Tribune Business News

Mar. 27 - Retired school teacher Lubertha Johnson of Enid was despondent. Somehow she had amassed a debt that surpassed $20,000 and was struggling to make payments on more than a dozen loans.

"There were about 14 loans in all, eight or nine to the little loan companies," she said. "I would have to pay on them each month and sometimes I would have to borrow from one to pay on the other."

Johnson, 80, turned to the Consumer Credit Counseling Service of Central Oklahoma's Enid office, which helped her reverse her spiral of debt. Johnson cut up her credit cards and Consumer Credit Counseling negotiated new payment schedules with creditors.

"I had so many debts until I didn't know what I was going to do," she said. "They really helped me a lot. If there was anything I didn't understand the counselor was right there to help me. She was just wonderful."

Johnson said she expects to be debt free within two years, and praises the credit counseling service for charting a new course for her.

She might have avoided the financial debacle had she been limited by state law to no more than one loan at a time to the "little loan companies," otherwise known as supervised or "B" loans, said Jennifer Delcamp, vice president of client and community development for the credit counseling service.

"I did a little research on our clients, because we were supporting the Senate bill that would limit clients to only one 'B' loan at a time," Delcamp said. "On average, our clients who have those kinds of loans, the 'B' loans, have an average of seven with as many as 16."

The so-called "B loans" are made under Section 3-508B of Title 14A of Oklahoma statutes. Known more familiarly as "signature loans," they are high-interest loans of up to $760 for a minimum term of 60 days with monthly installments due at 30-day intervals. Annual interest rates can be as high as 200 percent.

Delcamp referenced SB 1565 which recently passed in the state Senate and in the House banking committee and now awaits action in the full House. The language that would have regulated the "B" loan industry was struck from the bill before it passed, however.

Donald Hardin, administrator of the Oklahoma Department of Consumer Credit, estimates there are about 700 of the "B" lenders operating in Oklahoma. In 2002, they made 1.15 million loans totaling $490.45 million. The average loan balance was $427.

SB 1565 now calls for an interim study of the supervised loan industry, and does impose stricter limits on the newer "payday" loan industry in Oklahoma. Those are loans authorized by last year's Deferred Deposit Lending Act, sponsored by Sen. Angela Monson, D-Oklahoma City.

The act permits lenders to make payday loans up to $500 with a minimum term of 13 days and carry finance charges at an annual rate of more than 400 percent.

Monson and state Rep. Bill Nations, D-Norman, are co-authors of SB 1565, which would limit consumers to no more than one deferred deposit, or payday loan, at a time. It also would require them to wait 24 hours after completing one payday loan to obtain another.

And it specifies that names of consumers with payday loans be placed in a database that can be accessed by lenders to ensure they have no current loans before obtaining a new loan.

The state Department of Consumer Credit recently approved Veritec Solutions LLC to implement the database, which must be up and running by July 1. There are 358 payday lenders operating in the state, according to Hardin.

Delcamp said the "B" lenders need the limits that their payday loan counterparts will face if SB 1565 becomes law.

"I would love to talk to the senators about that," she said. "If you have seven loans where your payments are $50 to $100 a month (each), that's a lot of money and a lot of interest those clients are paying."

Nations said that the industry needs to be studied because "there is a real concern about whether the poor are being dealt with fairly."

However, Dixie Ochs, manager of B&F Finance Co. at 2303 N. Broadway, said the industry serves consumers in need.

"I have been in this business for over 20 years, and I have helped so many people, and they appreciate it being there when they need it," she said. "I can't tell you how many people have thanked us for being there."

Johnson said she doesn't blame the "little loan companies" for her financial woes, but is grateful that someone pointed her to the credit counseling service.

"I am just blessed," she said.

From: http://www.miami.com/mld/miamiherald/business/national/8305671.htm