Nevada treasurer says real issue with payday loans is ‘who has access and on what terms’

(This is the fourth story in a series about the payday loan industry in Las Vegas.)

While different groups debate the impact of payday lenders, Nevada is looking at ways to regulate the industry in the Silver State.

Nevada State Treasurer Dan Schwartz recently proposed initiatives he would like to introduce in the 2017 legislative session. He said these suggestions were developed after hosting a summit on payday lending this summer, which featured testimony from those working in the payday lending industry, as well as advocates for more regulation and consumers who spoke about bad experiences taking out loans.

“I don’t have a problem with people needing short-term loans,” Schwartz said. “The real issue is who has access and on what terms.”

Schwartz doesn’t believe current federal regulations are effective enough for payday loans in Nevada, which he said needs its own state regulations on the industry.

One of the first things his office is looking at is instituting a “cooling-off period” of 45 days to allow people to pay off their loans without incurring additional fees.

“Personally, I’d rather give people more time to pay off their loan,” he said, adding that he’s also proposing legislation to create a database of known payday loan users.

“Right now when people can’t pay off their loan, they go across the street to (another lender) to take one out to pay it off,” Schwartz said.

This puts people into a debt cycle as they continue to collect loans they can’t pay off. A database would help that, he added.

He also desires legislation to specifically look at payday loan practices surrounding veterans and educators, two groups that are often the target demographic for payday lenders.

“As frequent victims of predatory loan practices, they deserve better than they get when their cash needs fall short,” Schwartz said. “These individuals have served our country and our youth. Our (second) bill seeks to use the previously established public benefit corporation model to assist when unforeseen accidents and needs arise.”

This would essentially help teachers or veterans find alternative funding instead of payday loans.

He added this is a good starting point and — depending on how those communities benefit — might be expanded upon.

Despite having high interest rates — Nevada is known to have one of the highest interest rates for payday lending at 526 percent — Schwartz said he won’t be looking into regulating those rates.

“The reason I’m not advocating (for an interest rate cap) is because I don’t think that’s the problem,” he said. “I think we need to look at the deeper problem.”

Schwartz also said one argument he has heard against regulating interest rates is that the industry has to charge higher rates to contend with the percentage of people who don’t pay back their loans.

AJ Buhay, field director of the Progressive Leadership Alliance of Nevada (PLAN), said while regulation is a step in the right direction, the current proposals aren’t enough.

“What we expect from our state treasurer is that he will do what it takes to protect Nevadans — not just some — and that he will push for legislation that will protect consumers from the predatory and toxic practices of the payday loan industry,” Buhay said.

He added that the legislation currently proposed by Schwartz was a “tepid attempt to regulate an industry that takes out almost $8 billion a year from our community.”

“He can, and should, do more,” Buhay said of Schwartz.

PLAN is waiting to see how the proposed legislation’s language develops before the new legislative session.

“We want to see laws that will have a big impact on people’s lives, specifically an interest rate cap,” Buhay said. “This is already law in 15 other states and is something even Deputy Treasurer (Sheila) Salehian has stated that we needed in Nevada. We’ll wait to learn more and will work hard to push (Schwartz’s) office and all elected officials to finally curtail predatory lending in Nevada.”

The Consumer Financial Protection Bureau is calling for federal action to further regulate payday loans. The agency advocates for various policies to help protect consumers from unfair, deceptive or abusive financial practices.

“The Consumer Bureau is proposing strong protections aimed at ending payday debt traps,” said bureau director Richard Cordray. “Too many borrowers seeking a short-term cash fix are saddled with loans they cannot afford and sink into long-term debt. It’s much like getting into a taxi just to ride across town and finding yourself stuck in a ruinously expensive cross-country journey.

“By putting in place mainstream, common-sense lending standards, our proposal would prevent lenders from succeeding by setting up borrowers to fail.”

The bureau is looking to add regulations such as a full payment test, which would require lenders to determine whether the borrower can afford the full amount of each payment when it’s due and still meet basic living expenses and major financial obligations.

Amy Cantu, a spokeswoman for the Community Financial Services Association of America (CFSAA), said that while the organization — which represents short-term lenders — advocates for regulations, it thinks they should come at the state level.

“The CFSAA always advocates for regulations that promote consumer protection,” she said. “What works in Kentucky might not work in Florida. Each state should decide what works best for them.”

Cantu said regulations should make the distinction between legitimate payday lenders — which allow people with no or poor credit to access money — and illegal lenders. “They operate offshore and give the entire industry a (bad) rap,” she added.

Cantu added that if the regulations are too strict on legitimate lending agencies, it forces payday lenders to shut down.

“And that leads to the use of online lenders, who give the industry a bad reputation,” she said.

The CFSAA advocates for best practices such as extended payment plans or full disclosure in advertisements.

As of right now, regulations being proposed on a federal level have not been implemented.

For more information on the Consumer Financial Protection Bureau, visit consumerfinance.gov.

For more information on the Community Financial Services Association of America, visit cfsaa.com.

To reach Henderson View reporter Michael Lyle, email mlyle@viewnews.com or call 702-387-5201. Find him on Twitter: @mjlyle.