A bill introduced in the state Senate to cap unfair lending practices by payday loan businesses isn't enough.

A step in the right direction, Senate Bill 545 would limit payday lending businesses from charging more than 15 percent for an initial loan and 10 percent on loan renewals. The bill would also set a minimum 31-day loan period and prohibits the renewal of a payday loan unless a borrower has paid at least 25 percent of the principal plus interest on the remaining balance.

Unfortunately, the caps proposed under the bill will still add up to more than 180 percent interest for those borrowing from payday lenders and renewing their financial agreements. That's about 10 times the interest an average credit card holder may pay.

The bill should be revised to cap payday lending fees at the much lower 20 percent annual percentage rate range typically charged by credit card companies and their banks.

Payday lenders argue they should be allowed to charge extraordinarily high interest rates because they are offering unsecured loans to those banks will not otherwise lend to. But in today's day and age of electronic funds transfers and electronic banking, payday lenders really assume little risk on these loans.

Here's how the payday loan works:

A borrower writes a post-dated check to a payday loan company. The check is for the borrowed amount plus a loan fee. The lending company holds the check until the borrowers payday, then deposits it for immediate access to the funds. Immediate access is especially true if the lending company converts the paper check to an electronic check, which can hit at midnight on payday.

Prior to payday, the borrower has the option to roll over the loan amount for an additional fee.

Taking advantage of the roll-over option drives the interest rate higher, potentially putting a borrower in an endless cycle of revolving debt.

The payday lending limits proposed under the bill are better than nothing, which is what Oregon currently has in the way of protecting residents who live paycheck to paycheck.

According to Oregon Food Bank officials supporting the bill, payday lenders serve those who are in the most desperate of financial conditions in our state - for example, young families and migrant workers.

Many people using the service do so in order to buy groceries, pay rent or cover other living expenses.

In Umatilla County alone in 2002, Food Bank officials say there were 14,000 payday loans totaling more than $5 million. Nearly one-third of the loans were used to buy groceries, they said, citing a state survey.

Community Action Program of East Central Oregon food bank coordinator Paula Chavez calls payday lending "legalized loan sharking."

At the current rates payday lenders are allowed to charge in Oregon, we'd have to agree.

Payday lenders can continue charging roll-over and bounced check fees, and they can have you arrested for floating checks you don't have the money to pay for. The only thing they aren't doing is breaking your legs for failing to pay.

From 1999 to 2003, the number of payday loans increased 236 percent in Oregon, Food Bank figures show. Today, there are more payday lending companies in the state than McDonald's restaurants.

Limiting the payday loan business makes sense.

For now, we'll take Senate Bill 545 as a starting point.

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