November 2005

Executive Summary | News Release

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Executive Summary

In August of 2005, our staff surveyed 21 licensed payday lending storefronts in the City of Portland. Because many of the payday lending storefronts are owned and operated by the same payday lender, the survey is representative of approximately ninety-five percent (95%) of the licensed active payday lending storefronts in the City of Portland. The survey aimed to determine the interest rate most commonly charged in the City of Portland, based on a $300 loan principal for a 14-day term. In addition, the survey aimed to determine compliance with a state administrative rule, which requires that “the Annual Percentage Rate shall be posted prominently inside the lender's office where customers can easily see it.”1 The lender is required, however, only to disclose the annual percentage rate for a typical loan,2 the actual annual percentage rate the borrower may be charged can far exceed the posted rate.

Our survey results indicate that in the City of Portland: The most common annual percentage rate charged by payday lenders, based on a $300 loan principal for a full 14-day term is five hundred twenty-one percent (521%).

Twenty-four percent (24%) of lenders surveyed had no visible posting of the annual percentage rate of the loan. An additional twenty-four percent (24%) of lenders surveyed who did post the annual percentage rate of loan, placed the posting in an area which made it difficult to locate and read the posting. Thus, nearly half (48%) of those lenders surveyed either did not visibly post the annual percentage rate (APR) at all or posted it where customers could not easily see it.

The full results of our survey accompany this report.

The remainder of this report is designed to provide context to the results of this survey, including a description of the typical structure of a payday loan; a story of a Portland family’s experience with the payday lending industry; a look at the payday lending industry and its recent rapid growth; and a general look at the regulatory scheme in the state of Oregon.