Legislators revisit restrictions on check-cashing operations

Thursday, May 27, 1999 | 10:18 a.m.

The provision restricts the practices of check-cashing businesses in making short-term, high-interest loans in return for postdated checks.

The check-cashing rules were part of AB431 which expands laws governing unfair trade practices.

But the Senate Commerce and Labor Committee stripped out a section that capped the interest rates check cashers can charge borrowers on loans in default.

The capped rate would be 10 percent plus the prime interest rate that banks charge their most creditworthy customers.

Assemblywoman Barbara Buckley, D-Las Vegas, said she wants to protect people who "find themselves on a debt treadmill" after borrowing small sums from check-cashing services.

Check-cashing companies typically charge 1,000 to 1,500 percent interest per year to customers, who write checks as collateral for loans.

Buckley said one woman borrowed $300 and paid $1,300 on the loan. Yet, she owed another $2,600 and was sued for that money in less than a year.

On the other hand, Jim Wadhams, a lobbyist for the Nevada Independent Check Cashers Association, said his clients need some protection. He counted about 60 check-cashing locations around the state who cater to tens of thousands of people who often can't borrow from a bank.

"Her original bill would have put these companies out of business," Wadhams said.

Buckley said her bill also would prohibit prosecutors from charging borrowers for worthless checks when they can't repay their debts on time, she said.

While the interest rates are high, the risks are high and people typically borrow only small sums, the lobbyist said. A typical borrower would get $300 for two weeks until pay day and pay $25 in interest, he said.

Wadhams said the Legislature should give more time to see if a new law, that became effective in October, will reduce industry abuses. The law requires check-cashing services to obtain licenses, but some companies ignore it.