A recent audit by the Nevada Division of Financial Institutions found that about one-third of payday lenders received a less than satisfactory review over the past five years.
The Financial Institutions Division notes in his report that despite the high number, some of those with poor ratings were due to violations identified at other company sites that were considered company-wide issues.
Mark Chappell is one of many to take out a payday loan. He borrowed money several years ago to pay his bills.
“You just manage to pay for car insurance and stuff anyway,” Chappell says.
He was able to pay it off before his debt got out of hand, but that came with high interest.
“I had that experience and I wouldn’t do it again.”
Attorney Tenille Pereira of the Southern Nevada Legal Aid Center helps people trapped in a cycle of debt. The Legal Aid Center offers free advice and assistance to people struggling with a payday loan.
Pereira says that before you take that quick cash, know your rights if you’re ever unable to pay it back.
“You don’t have to take out a new loan. It can default and give you the chance to get out.”
Pereira tells 13 Action News that it’s no surprise that a third of payday lenders received a less than satisfactory review from the state.
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Although numerous violations were found, the audit found that better follow-up needs to take place after payday lenders were found with less than satisfactory reviews.
For example, 13 licensed payday lenders received less than satisfactory review ratings in 2016. Only two follow-up reviews were conducted in 2017.
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Additionally, the audit also revealed that a centralized payday loan tracking system could also benefit the Financial Institutions Division, payday lenders and legislators. This could help licensees track loan management, determine loan eligibility, comply with the law, and prevent consumers from going into debt. The Financial Institutions Division could also be better able to identify irregular activities by lenders.
Pereira agrees. “What has been put in place are great consumer protections, it’s just not being enforced…There’s a need for a database to track compliance. To ensure that we are truly in compliance.”
A payday loans database was considered in the 2017 legislative session but did not pass.
A database could assist with the inclusion of real-time licensee data, including loan inventories and check cashing logs. The Financial Institutions Division would be better able to track potential violations prior to a review.
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Nevada is one of 36 states that offer payday loans, with 14 of those states using a database tracking system.
Although the database did not pass in the 2017 legislative session, other reforms have moved forward. One of the main changes in AB163 involved “proof of ability to pay”.
Currently, a person applying for a loan usually signs an affidavit stating that they can repay the loan, but sometimes there is no way to verify if they can repay it.
Under the new rules, lenders could check more information such as bank statements and income to ensure customers can repay loans.
The grace period offered after granting a loan was also discussed. The new rules prevent lenders from using the grace period as an excuse to raise rates to a high amount or offer another loan to pay off the original loan, which can create a cycle of debt.
The lawmaker behind the bill, Assemblyman Edgar Flores (D-Las Vegas), told 13 Action News last May that he hopes the legislature will also reach out to people who turn to different lending companies to repay multiple loans.