Interest rates cap urged

Monday, April 2, 2001 | 10:34 a.m.

CARSON CITY -- Interest rates as high as 240 percent per year are being charged on loans to some of Nevada's most vulnerable residents, and an Assembly committee has been urged to cap the rates.

"It's absurd and they are taking advantage of poor citizens," said Justice of the Peace Robey Willis, who was joined by other Carson City officials to support a bill to limit interest on installment loans.

Willis and fellow Justice of the Peace John Tatro, both of Carson City, told the Assembly Commerce and Labor Committee Friday that they see rates as high as 242 percent in their courts. When the borrowers can't make the payments, a small claims court action is filed and their wages are attached.

"In Chicago, they use to call this 'juice,'" Tatro said.

The bill, Assembly Bill 421, was introduced by Assemblywoman Bonnie Parnell, D-Carson City, who said such "high risk loans are for the most vulnerable citizens."

The measure calls for a sliding interest scale. It would allow 36 percent interest to be charged on the unpaid balance of up to $300 and 15 percent per year the unpaid balance over $1,000. Or lenders could offer up to 18 percent per year on the entire balance.

Limits on interest charges were removed in 1981, said Assemblyman Joe Dini, D-Yerington, who is chairman of the committee. The ceiling was eliminated because companies were leaving Nevada and money for construction and other ventures was drying up.

"I'm not interested in closing the door to financial institutions," Parnell said.

The 1999 Legislature capped interest rates that could be charged by check-cashing businesses at prime plus 10 percent, Assembly Majority Leader Barbara Buckley, D-Las Vegas, noted. Before that, she said, a person who borrowed $200 could end up paying $1,200.

The Carson City justices testified that high rates on installment loans are a growing problem locally. "If this is going on in little Carson City, you can image what is going on in Clark and Washoe counties," Tatro said.

Bob Barengo, a lobbyist for the Nevada Consumer Finance Association, said such high-interest loans are given for a short period to people who don't have a credit card or a bank balance. The borrowers understand the interest rate.

"They have no other way of getting money," he said. "It's all disclosed and the consumer is aware."

The companies in his association don't charge those excessive rates. But he said the amount permitted in the bill -- 18 percent -- is lower than credit card companies charge.

Scott Craigie, representative of All American Title Loan, said such borrowers are "high risk" and need a loan for such things as medical and utility bills. They are high-default rates, he said, adding that the industry needs to be protected.

The committee did not take action on the bill.