KLAS-TV Channel 8 News Las VegasPayday Loan Companies - Part 2
(May 14) -- There are 300 payday loan companies operating in Clark County right now. Under state law, they can charge whatever interest rate they want. Eyewitness News found examples of 600-percent. But it's not just the high interest rates, which can get you into trouble.
If you pay a "payday loan" off within two weeks you're not out a lot of money. Anything longer than that, not only does the interest add up, so do fees and penalties. And Eyewitness News uncovered a state statute meant to protect consumers has a loophole in it.
Wayne Robinson's problem started out small. "It was to pay off an electric bill. I borrowed $200," Robinson explained.
Two hundred dollars borrowed two years ago has snowballed into thousands in debt. Time in the hospital prevented Wayne from paying off the loan on time, subjecting him to a 300-percent interest rate plus hundreds of dollars in late fees and penalties. He's still making payments.
Payday loan customer Wayne Robinson said, "At least 800 -- $800."
Eyewitness News Reporter inquired, "A month?"
Wayne Robinson replied, "Um hmmm."
Eyewitness News Reporter asked, "On a $200 loan?"
Wayne Robinson said, "That started off as a $200 loan."
The State of Nevada regulates payday loan companies. A state law limiting lending rates to 18% was retired 23 years ago. What's currently on the books is more of a suggestion than a law.
Nevada's revised statute 604 says a payday loan company may charge interest on a default loan equal to 10-percent plus the prime interest rate of the largest bank in Nevada. Right now that would equal 14%. Much less than the 300-percent Wayne Robinson is being charged. But because the statute says, "may", it gives payday companies a choice. One they usually make in their favor.
Jim Marchesi, with Check City commented, "Folks, this is not what the law intended. And we need to make sure you're staying within it."
Jim Marchesi is with the Nevada Financial Services Association and says consumers need to understand what they're getting into when they take out one of these loans.
Mike Howard, payday loan customer, says, "Everything is well defined. There's no hidden costs. You know like I said it was an experience that was very accommodating."
On average, Howard takes out one payday loan a month for his business. He doesn't borrow a dime until he knows what fees he may face. "
Wayne Robinson, pinned under thousands in debt, had to sell his car to pay off a payday loan. As costly as his situation is, he's the first to admit nothing's more expensive than regret. "Man, I feel bad. I feel real bad, I don't know how I'm gonna do it."
As far as the vague language in the Nevada statute, which regulates payday loan companies, Jim Marchesi would like to see it changed to offer consumers a little more protection than they have now.
