Governor signs payday loan law

Gov. Jim Gibbons on Friday signed legislation slamming the door on what he and Speaker Barbara Buckley, D-Las Vegas, described as unscrupulous payday loan practices.

Lawmakers attempted to stop some of those practices two years ago, putting restrictions on short-term loans, which the legislation described as a year or less. Buckley said some lenders responded by rewriting all their loan contracts to one year and one day, escaping the controls.

There has been testimony that some of the loans being issued charge in excess of 2,000 percent interest a year and contain hidden fees and penalties which drive up costs even more.

Gibbons said AB478, which takes effect Oct. 1, will help protect "our men and women of the military from unscrupulous lenders."

"I give the speaker great credit for proposing this legislation and bringing it before us today," he said.

Buckley said that while the legislation is needed to protect all those who deal with short-term, high-interest lenders - payday, car title and installment lenders - it is especially important for military personnel whose families are under severe financial stress because they are on active duty. She said 20 percent or more of those loans are to military families.

"They are the preferred prey," she said, noting the military has described these financial issues as the No. 1 threat to military readiness.

The new law closes the door on that one-year-and-one-day contract practice by changing the definition of what restrictions apply to from "short term" to "high interest." It defines high interest as any loan charging more than 40 percent annual interest. And the law requires all interest, application, credit plan fees and prepaid finance charges to be listed in calculating the annual percentage rate.

It says high-interest loans should not be more than 35 days in most cases but allows up to 90 days if certain conditions are met: That payments are installments, the loan isn't subject to extensions and does not require a balloon payment.

Buckley said some of the loans issued under current law are for something like $200 with $50 interest-only payments for a year after which the individual still owes the original $200.

The law also limits title loans to no more than 210 days and says it must be paid in equal payments with no balloon payment at the end.

Finally, it puts an end to garnishment and collections against military personnel who are deployed to combat zones and allows a base commander to bar military personnel and their spouses from doing business in certain branch locations.

• Contact reporter Geoff Dornan at gdornan@nevadaappeal.com or 687-8750.