No matter what else may be said about the payday loan industry, this much should be clear: You should not have to sell your blood plasma in order to make a loan payment.
Oh, but that’s happened. And it’s the tip of the iceberg regarding the horror stories told by people trapped by a debt treadmill that is difficult if not impossible to hop off.
That’s why state Treasurer Dan Schwartz is prepared to introduce two bills at the 2017 Legislature aimed at rescuing consumers from the trouble posed by payday loans.
The first would limit consumers to one payday loan at a time, and impose a 45-day cooling-off period between the time one loan is repaid and another issued. The state would create a database of all payday loans to ensure the provisions of the law are met.
The second bill would create a public corporation to provide a way for veterans and teachers to access emergency capital without having to use payday loan businesses.
Grant Hewitt, chief of staff for the treasurer’s office, says Schwartz became aware of payday loan issues while hosting financial literacy workshops for state residents. That’s where he began hearing stories about people taking multiple loans, paying one outstanding balance with another loan from the same lender, or visiting a second payday loan store to borrow money to repay a balance at the first store.
Schwartz is a Republican, and not a mushy one at that. He opposed Gov. Brian Sandoval’s 2015 tax hikes, although he embraced that session’s signature conservative achievement, the Education Savings Account program. He’s raised questions about the advisability of issuing bonds to help pay for the Faraday Future electric car project planned for North Las Vegas.
Surely, Schwartz will get an earful from some fellow Republicans who embrace the industry’s side of the story, which is that payday lenders serve an important niche for customers who can’t get traditional loans, who need cash for short-term emergencies and who use debt responsibly and don’t need the heavy hand of government trying to save them from themselves or snoop into their borrowing habits.
But Schwartz is pushing ahead with his ideas, which are endorsed by groups including the Legal Aid Center of Southern Nevada. (The center’s executive director, Barbara Buckley, is a former Assembly speaker who pushed payday-loan regulations during her tenure in Carson City.)
“There are some times when it’s government’s job to protect those who need to be protected,” Hewitt said. Some of the customers of payday loan companies, “just never get ahead and they’re falling further and further behind.”
The stories are confirmed by attorneys at Legal Aid, who see clients forced to file bankruptcy or suffer other dire consequences because of problems managing the debt issued by payday lenders. One of them, Tennille Pereira, points out that payday loans for active duty members of the U.S. military are limited to 36 percent interest, and soldiers and sailors are still getting loans. She suggests that as a limit for all such loans.
Hewitt says Schwartz also believes Nevada schools need to teach more classes about financial literacy, so younger people become aware of how easy it is to slip into deep debt and struggle to repay what you owe. And citizens in general need that kind of knowledge as well, he said. “It’s a topic that needs to be addressed,” he said.
Hanging over the coming 2017 Legislature are promised regulations of payday loan companies promulgated by the Consumer Financial Protection Bureau, the federal agency created by the Dodd-Frank financial reform legislation.
But Hewitt and Pereira say Nevada needs to act independently, regardless of the actions federal regulators may take.
Steve Sebelius is a Review-Journal political columnist. Follow him on Twitter (@SteveSebelius) or reach him at 702-397-5276 or SSebelius@reviewjournal.com.