Office of Governor Gary Locke
FOR IMMEDIATE RELEASE - January 24, 2003
Contact:  Governor's Communications Office, 360-902-4136

Gov. Gary Locke Calls for Stronger Consumer Protection on Payday Lending

Governor Gary Locke announced today that he is seeking legislation to strengthen consumer protections for payday lending. Payday lending is the practice of providing small, short-term loans at high interest rates.

In recent years, the payday lending industry has grown significantly in Washington. Currently, more than 500 payday loan offices in Washington process more than 2.2 million loans totaling nearly $740 million annually. By law, these loans cannot exceed $500 and fees cannot exceed $15 per $100 borrowed. The typical loan is under $350 with a two-week repayment period.

“We recognize that many citizens like the service and convenience that payday lenders provide,” Locke said. “But we also recognize that the terms of some payday loans can send borrowers into a cycle of debt from which they cannot escape. This bill protects these consumers while ensuring that payday lending services will be available to those who want them.”

The proposed legislation allows consumers to rescind payday loans at no cost within one business day. In addition, it prohibits payday lenders from taking personal property as collateral for a loan, limits collection fees, and bars lenders from collecting more than one post-dated check per payday loan period. The measure will also give borrowers the right to a payment plan after four successive loans.

Under this measure, the maximum amount of a payday loan will increase to $700 and extend the maximum term to 45 days. However, it clarifies that no more that $700 may be lent to any one borrower at any one time, and limits the fees that can be charged on amounts over $500, regardless of the number of loans outstanding to one borrower.

“This legislation goes far to prevent the worst abuses of payday lending,” said Helen Howell, director of the state Department of Financial Institutions. “It gives protection and debt relief to some of our most vulnerable citizens.”

In 2002, the department convened a task force of consumer representatives, banks, credit unions and payday lenders to review payday lending practices. The legislation reflects the recommendations of the task force, and is supported by payday lenders as well as banks, credit unions and consumer advocates.

» Return to this month's News Releases

» View News Release Archive