High-interest lenders target of legislation

Friday, March 26, 1999 | 11:02 a.m.

CARSON CITY -- Lending businesses that specialize in short-term, high-interest loans would be more strictly regulated under a bill introduced Thursday by Assemblywoman Barbara Buckley, D-Las Vegas.

Buckley says the interest and late-payment fees are too high and that the collection methods include threatening customers that they will go to prison if they don't meet the payments.

Customers of such lending businesses are largely cash-strapped workers living from paycheck to paycheck. Often, the loans extend only until the next paycheck, when the worker must repay the principal along with interest that Buckley says can be as high as 1,000 percent. If the loan cannot be repaid within the specified time, fees are tacked on.

Buckley's bill would limit the interest on such loans to 36 percent a year. It would also make it illegal for these businesses to threaten a customer with prison for nonpayment.

At a hearing before the Assembly Commerce and Labor Committee, Buckley said she felt as if one individual in the industry "threatened me for bringing the bill."

"If they threaten a legislator, I wonder what they would do with a customer," Buckley said.

After the hearing, Buckley said the person "engaged in name calling and in what I thought was pretty inappropriate things." She said she was called a liar and that her motives were questioned.

Buckley, who heads the Legal Aid office in Clark County, said individuals who have approached her office with loan problems have also reported being threatened by lenders.

"A couple of them (members of the industry) have threatened the individuals who acquired the money from them, saying things like, 'You better watch your back. If you go to a lawyer, you're going to be in trouble. If you report this you're going to be in trouble.' "

But Robert Frimet, president of the Nevada Independent Check Cashers Association, said Buckley's bill would put him out of business.

"I will lose everything I worked hard to gain," he told the committee.

The legitimate businesses licensed by the state post fees to show the borrower how much he will have to pay. And the present law doesn't limit his profit.

"This is not a pot of gold at the end of the rainbow," said Frimet, owner of the Casa De Cambio check cashing business in Las Vegas.

He estimated that two to three loans out of every 10 he makes are in default. He said he's now holding $35,000 in checks. But he added some of these people may pay later.

The industry, he said, serves 37,000 customers and $660 million has been given to Nevada customers. "Consumers created this industry," he said. "I should have every right to collect."

He said for a $300 loan, due in one month, he charges a $100 fee. If the person cannot pay on the due date, a $300 rollover fee is charged, plus the additional $100 fee a month.

Buckley complained that these businesses were earning 500 to 1,000 percent on their loans.

Daphne Hunkin, a six-year resident of Las Vegas, said she borrowed several times anywhere from $200 to $500 and was charged anywhere from $5 to $15 per $100 per week.

The loans, she said, put her on a "debt treadmill" and the interest ran up to 720 percent. She compared this to "legal loan sharking."

The committee did not take action on the bill and Buckley said she would work with "reputable" members of the industry on amendments.