Velvet Blade is a lesbian in Oregon running a blog by the name of Softly Dreaming. Softly Dreaming came to life because she wanted to run a blog close to her lesbian heart. The site covers everything from politics to rants to lesbian life… and sometimes it even dabbles in finances. These are her words…

The other day I got one of those ‘œYou’re Pre-Qualified for an unsecured loan’ notifications. I am always curious how wonderful these offers are. I usually just shred them immediately, but thought I would take a closer look.

Egads! They tout their ‘œfixed interest rate’. Sounds good, doesn’t it? To know what your interest rate is and that it will never change? What a load off of my mind to know that 96% APR will be charged to me to borrow a meager amount. Where the heck can the interest rate go when it’s already at 96%?

In all fairness, they do state that, ‘œHigher rates may apply for approved applications that choose our manual loan funding process.’ So, if you want a human to touch your application, you will be jacked even more.

Let’s break this down a little further, shall we?

This is the repayment they propose:

  • For $1000 today, you will gladly pay $85.34 each month for 36 months. That means your repayment will be $3072.24 if you go the course.
  • For $1500, you will pay $4,608.72
  • For $2000, you will pay $6,144.84

That’s crazy! Obviously if you take this loan, you probably don’t have an extra $6k laying around.

So I decided to call the Oregon Attorney General to see what the cap on APR is in Oregon where I live. When I used to do financials, it was maxed out at 29.9%, which I thought was crazy high at the time. A nice volunteer said he had no clue, but had asked one of his co-workers. She said the laws recently changed, and she was not sure. The gentleman I spoke to was floored when I told him of the 96% APR and called it ‘œblatant usury practices’.

Several payday cash advance places have had to move out of Oregon recently because of their usury rates, sometimes higher than 300% APR. I had a neighbor several years ago who got a title loan at some extortionate rate for her hoopty. She was five minutes late paying her payment, and they already had someone ready to repo her vehicle, but were still happy to take that last payment and her vehicle. Most of those title loan places have also been ousted from Oregon.

The Attorney Generals office sent me to the Division of Finance and Corporate Securities, who set things like the APR limits in the state. You would think with such a simple question, it would be prominently posted on their website, but no joy with a search. I had to leave two message for two good bean counters to get an answer. A different one called me back.

On their site, however, I discovered this about payday loans, released September 2008.

As of July 1, 2007, the State of Oregon limits the fees that may be charged for payday loans. Lenders may charge an interest rate up to 36 percent per annum*. They may also charge a one-time loan origination fee for a new loan of up to 10 percent of the amount borrowed, up to a maximum of $30.

Mr. Corporate Securities said they get a lot of complaints against the bank mentioned above, a family run bank in South Dakota and Iowa. He said that although the interest charged for payday loans was capped (as above) in Oregon, a bank charter means they can charge whatever APR they want with no cap in Oregon.

I guess the thinking is that a bank actually wants your continued business, so they will treat you better since there is more competition. The moral of the story is, it’s not illegal to prey on folks who need cash and figure a quick fix is what they need. But it’s literally stealing from Peter to pay Paul. So buyer beware!

More about Velvet Blade
Velvet Blade started her professional career in the entertainment industry, working primarily in film, theater and television and she performed professionally in the US and extensively throughout Europe. Her out-of-the-box thinking, visionary problem-solving skills and talent for innovation led her into sales and marketing in the gift and technology industries, becoming a successful entrepreneur in her own right. She often consults for small to medium-sized businesses on creative marketing techniques on a shoestring budget. A published author, she is preparing to publish her book on positive thinking and perception. Velvet also runs several blogs including Softly Dreaming.

Photo credit: Softly Dreaming.