Florida, Oklahoma databases reduce loans per customer

Friday, March 4, 2005 | 4:59 a.m.

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March 5 - 6, 2005

To discourage their residents from taking out more payday loans than they can handle, Florida and Oklahoma have developed databases that track each loan.

While Nevadans may take out as many payday loans as they desire, Florida residents may take out only one payday loan at a time, and Oklahomans are restricted to two loans at once.

The databases have done such a good job of tracking individual loans that consumers are using payday lenders less frequently than in the past, officials of both states said.

Nevada is not considering a database, though Assemblywoman Chris Giunchigliani, D-Las Vegas, said she would like the Nevada Legislature to consider a mandatory cooling-off period that payday loan customers must endure between loans. That would help consumers avoid mounting high-interest debt, she said.

"I don't think you'll see the Legislature put them (payday lenders) out of business but the bad ones need to be cleaned up," she said.

Commissioner Carol Tidd of the Nevada Financial Institutions Division said her department, which regulates payday lenders, does not have the money to operate a database that could help track cooling-off periods.

But money is no problem in Florida and Oklahoma because their databases are financed by transaction fees that are charged to the borrowers when they get their loans. It works out to $1 per transaction in Florida and 46 cents per transaction in Oklahoma. Both states use the same company, Veritec Solutions LLC of Jacksonville, Fla., to design the computer software and operate the databases.

The databases can be accessed by all payday lenders in both states so that they can determine whether an individual seeking a loan already has one that hasn't been paid off.

In the three years that the database has been operating in Florida, the number of loans taken out by the average borrower has dropped from 12.1 per year to 8.4, according to Mike Ramsden, financial administrator for the Florida Office of Financial Regulation. Florida has a 24-hour cooling-off period between payday loans.

"The Florida Legislature wanted to make sure consumers didn't get too reliant on this type of lending because of its high cost," Ramsden said of the database. "It works tremendously well."

Oklahoma's system kicked in last year. One thing noticed by Jack Stone, deputy administrator of the Oklahoma Department of Consumer Credit, is that it is now much more difficult for a borrower to exaggerate on a loan application the number of payday loans he has outstanding.

"We knew that customers were lying before," Stone said. "The database is very good because it has cleaned that up."

Cash Cow Corp. President David Cowles of Las Vegas is one payday lender who believes a database would be worth considering in Nevada. He and many other payday lenders already use privately operated databases such as Teletrack to determine whether prospective customers have had a history of passing bad checks.

"If we know a customer is in a situation where it will be difficult for him to repay us, we won't loan him the money," Cowles said.