On Thursday, a law intended to shield Oregonians from predatory loans was approved by the Oregon House.
The Depository Institutions Deregulation and Monetary Control Act, a federal legislation, allows some out-of-state lenders to charge higher interest rates than Oregon’s 36% ceiling on short-term consumer loans.
House Bill 2561 would opt Oregon out of the federal regulation and mandate that lenders headquartered abroad adhere to the state limit. It passed the chamber 33–23. With one Democrat voting against the bill and no Republicans supporting it, it passed on a largely party-line vote.
Opponents claim the proposal is a blunt instrument that would restrict banking options and lead to an avoidable court fight, while supporters claim it would protect Oregonians from loans with exorbitant interest rates.
Although the prevalence of these loans was not immediately apparent, the Oregon Department of Consumer and Business Services stated in written testimony in favor of HB 2561 that regulatory examinations conducted in 2022 and 2023 discovered two lenders who made more than $37 million in loans that exceeded the cap.
Supporters claim that companies that primarily conduct business online take advantage of the loosened regulations on out-of-state lenders.
Rep. Nathan Sosa, D-Hillsboro, stated in a press release that we must close the gap that has permitted these out-of-state lenders to violate the text, if not the spirit, of our legislation in order to stop predatory activities. In times of financial hardship, we must make sure that Oregonians are not being taken advantage of by corporate, online loan sharks.
The American Fintech Council, which advocates for banks and financial technology firms, is among the bill’s opponents. Phil Goldfeder, the group’s CEO, claimed that the law would restrict consumer choices and make it more difficult for state-chartered banks to conduct business outside of Oregon.
According to him, choosing out only disadvantages your state in comparison to all other states in the nation.
Colorado opted out of the federal law in 2023, and Goldfeder pointed out that there is still a legal battle going on there. Should HB 2561 become into law, similar lawsuits might be brought in Oregon.
That isn’t a cause to delay, according to backers.
Chris Coughlin, policy director for the group Oregon Consumer Justice, which backs the bill, stated, “We’ve been seeing this loophole here for a while and just feel like it’s time to move forward.” We don’t know how long the case in Colorado will last.
The Oregon Department of Justice and Governor Tina Kotek are among those who favor the bill, which is now on its way to the Senate.
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Matthew Kish covers business, notably the banking and sportswear sectors. You can reach him at @matthewkish, [email protected], or 503-221-4386.
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