Payday lenders, primed customers

Tuesday, June 5, 2007 | 6:52 a.m.

By allowing people to pay utility bills at payday lenders, Nevada Power Co. and other utilities nationwide may be making them more susceptible to turn to the high-interest-rate operations for other financial matters, an advocacy group for low-income customers says.

In a report released today the Boston-based National Consumer Law Center identified 21 Southern Nevada payday lenders and check-cashing outlets among places that customers of the electric utility can pay their bills.

The law center, a longtime critic of the high-interest rates charged by payday lenders in the 39 states where they are legal, opposes allowing those lenders to collect utility payments on the belief that it helps the loan companies attract new customers.

Instead, utilities should use other businesses, such as supermarkets and drug stores, said Rick Jurgens, a consumer advocate at the law center.

"Our report shows that this is an extensive practice, and it's something consumers and consumer advocacy groups should be aware of," Jurgens said. "They should ask the utilities to stop this practice or ask the regulators to prod the utilities to stop it."

Larry Holmes, manager of customer strategy and programs for Nevada Power, said Monday that the utility has nothing to do with selecting the businesses where bills can be paid. That is left to Western Union, which Nevada Power has used since 2002 as a third-party bill payment service, he said.

Holmes said Western Union independently makes arrangements with local businesses without input from the utility. The fact that some of those businesses are payday lenders is of no concern to Nevada Power, he said.

"It's not really our business to manage our customers' financial affairs," Holmes said.

Sherry Johnson, a spokeswoman for Western Union at its headquarters in Colorado, said payday lenders and check-cashing services make up a small percentage of the businesses used by her company to accept bill payments.

There is nothing wrong with payday lenders serving as places where utility bills can be paid, she said. "Western Union bases its agent relationships where our customers are already doing business."

Nevada Public Utilities Commission spokeswoman Kristy Wahl said the commission, which regulates Nevada Power, does not have the authority to dictate where utility customers can pay their bills.

"That would be micromanaging," Wahl said. "We deal with rates and fuel supply and resource planning, but we don't get into the nitty-gritty."

The law center report focused on 21 of the nation's largest utilities, including AT&T and Pacific Gas & Electric Corp., and found that they used more than 650 licensed lenders as places to collect electricity, natural gas and telephone bills.

"When utilities send their customers to pay bills in the storefronts of ultrahigh-cost payday lenders, those customers - typically the most financially vulnerable - become targets for predatory loans," the report said.

Nevada Power's Web site identifies 143 Southern Nevada businesses where customers can pay their electric bills, including the 21 that specialize in payday loans or check-cashing services. The list includes payday lenders Cash Box and Loan Mart, each with seven locations where bills can be paid.

Several years ago, the extremely high interest rates charged by a growing number of payday lenders in the Las Vegas Valley caught the eye of the Nevada Legislature, which in 2005 passed a law aimed at reducing predatory lending practices.

Gov. Jim Gibbons on Friday signed Assembly Bill 478, which seeks to close a loophole in the 2005 law by requiring a maximum term of 35 days on loans that carry interest rates exceeding 40 percent. The interest rate then must be lowered to the prime rate plus 10 percent - which would currently be 18.25 percent total - on all loans that extend beyond 35 days.