Friday, Sept. 16, 2005 | 9:29 a.m.
Plenty of confusion exists over a new state payday loan law that is intended to help get consumers off of their debt treadmills.
That much was clear Thursday when Nevada Financial Institutions Division Commissioner Carol Tidd conducted a workshop at the Sawyer State Office Building for about 50 payday and installment lenders to discuss the new law, which went into effect July 1.
Several members of the casually dressed audience could be heard mumbling their disapproval over various aspects of the law and how it is being interpreted by regulators. Some businessmen intimated that their companies could be adversely affected depending on how the law is interpreted.
Even Tidd said after the four-hour session that portions of the law remain confusing to the division, which is charged with enforcing the provisions.
The law, which came from Assembly Bill 384, was widely considered to be the most important piece of consumer protection legislation passed by the Nevada Legislature this year.
"There was confusion about the bill during the session, and there are things in the law that our staff has gone round and round on," Tidd said.
But Tidd also said it was her hope that lingering issues will be clarified after her division adopts administrative regulations to enforce the law.
A regulatory workshop has been scheduled by her division for Oct. 7, followed by an Oct. 21 hearing to adopt the regulations. Both sessions will be at the Sawyer Building and simulcast to Carson City.
"For the average consumers who pay off their loans on time, the law probably won't make a difference," Tidd said. "But it will affect the people who have been going into default, the ones you read about."
The new law established what is known as a 604A license for businessmen who offer check-cashing services, payday loans, title loans where a motor vehicle is used as collateral and/or other short-term loans. A short-term loan is defined as a loan that carries an annual interest rate of more than 40 percent and must be paid off in less than 365 days.
Other businessmen, such as long-term installment lenders, would remain regulated under a 675 license.
The new law makes it illegal for lenders to sue defaulted customers for three times the amount of the original loan, as had been common practice before July 1. It also established tighter restrictions on the practice of rolling over loans when they are not paid off on time, and on the amount of loans that could be received by consumers based on their gross income.
But it does not stop businesses from charging the equivalent of triple-digit annual interest rates.
One of the most confusing aspects of the law has to do with businesses that would transact loans under both a 604A license and a 675 license. Tidd said her initial reading of the law was that a business would have to conduct 604A transactions at one address and 675 loans at another location if they wish to carry both licenses.
But Kim Koster, chief executive officer of Koster's Cash Loans, and Jim Marchesi, owner of the Check City payday loan chain, vehemently disagreed with that interpretation.
"There are quite a few of us who offer both," Koster told Tidd. "I'd have to open up 19 new offices or give up half my customer base."
Marchesi, who helped draft the law as president of the Nevada Financial Services Association, said the intent was to give the financial institutions commissioner the discretion to allow businesses who carry both licenses to offer all of their services under one roof.
Afterward, Tidd said that provision of the law "is a can of worms" that her division plans to address.
"It would help me if I saw the entire legislative history," she said.
Businessmen expressed confusion about other aspects of the law, such as how it applies to customers who have been called up for active military duty and the length of time consumers who have defaulted on loans can take to accept a repayment plan before being hauled into to court.
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