Editorial: Closing a gap

Monday, May 14, 2007 | 7:06 a.m.

In 2005 the Nevada Legislature passed a law that brought long overdue regulations to the state's previously unregulated high-interest payday loan industry.

The law, enacted shortly after a series of in-depth stories by the Las Vegas Sun in March 2005, prohibits triple-digit interest rates and prevents lenders from suing defaulted customers for three times the amounts they borrow. It also bars lenders from refinancing unpaid loans at higher interest rates and limits the amount a customer receives based on his income.

But even with these safeguards, there remains a loophole.

Currently, businesses that offer their high-interest loans on an installment plan and don't accept postdated checks from consumers aren't defined as payday lenders under the 2005 law. So they can basically continue charging interest rates up to 900 percent, Assembly Speaker Barbara Buckley, D-Las Vegas, told members of the Senate Commerce and Labor Committee on Thursday.

Buckley, who is pushing for legislation to close the loophole, said including all short-term or payday-type lenders isn't about creating "fair competition"; she said this is about stopping lenders who are "putting people on a cycle of debt that they never get off." She displayed one lender contract in which a customer was required to pay $1,602.60 on a year-old $200 loan.

Companies have a right to collect interest on their loans, but none should be allowed to charge outrageously high rates. About 500 of the state's payday lenders manage to obey the 2005 law. It is time to close the loophole and force all such businesses to play by the same rules.