Monday, Jan. 2, 2006 | 7:37 a.m.
In her private career, Assembly Majority Leader Barbara Buckley, D-Las Vegas, is head of Clark County Legal Services, which assists low-income people. In this capacity, she was for years a strong critic of payday loan companies. Many clients came to her nonprofit organization with horror stories of being forced to pay stratospheric interest rates after falling behind in payments.
In March the Las Vegas Sun reported in depth on the practices at the more than 300 payday loan stores in Nevada, revealing that their median annualized interest rate on loans amounted to 443 percent. This newspaper also revealed that some lenders were charging annualized interest rates of more than 1,300 percent. Also reported in the story was that payday loan companies were virtually unregulated in Nevada.
Following the Sun's reporting and Buckley's criticisms, the 2005 Legislature passed a law regulating payday loan companies. It made it illegal for lenders to sue defaulted customers for three times the amount of the original loan, which had been common practice. It restricted the practice of "rolling over" the loan, meaning a refinancing of the loan at a higher interest rate if it wasn't paid off on time. It also set limits on the amount of loans a customer could receive based on his income.
A legislative committee, the Committee on the Review of Regulations, last week clarified further aspects of the law. Triple-digit interest rates are no longer allowed. The interest rate on defaulted loans can only exceed the prime rate by 10 percent. Every loan must be accompanied by full disclosure of all fees. And the law establishes a $10,000 fine for any short-term loan company that operates in Nevada without a license.
Buckley, a committee member, reminded the state Division of Financial Institutions that "This law is only good if you enforce it." Carol Tidd, commissioner of that division, said she would hire five new examiners and station four of them in Las Vegas, where 75 percent of the payday loan companies are located.
We believe real progress has been made in protecting vulnerable consumers from unscrupulous loan practices. The Legislature, along with the Division of Financial Institutions, should closely monitor the law for the purpose of improving it if abuses continue to occur.
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