After fits, starts, & industry pushback, state payday loan database finally operational

After fits, starts, & industry pushback, state payday loan database finally operational
(Nevada Current file photo)

by Michael Lyle, Nevada Current
February 8, 2022

CARSON CITY–A statewide database to track short-term payday loans, which was supposed to be operational July 2020, is finally up and running a year-and-a-half later.

It took until Feb. 1 of this year for that system to go live, a year after lawmakers approved regulations governing the database on Dec. 28, 2020. 

After failing to grant a hearing for legislation in 2019 that proposed capping percentage rates for payday loans, which can be upwards of 600% in Nevada, lawmakers instead passed Senate Bill 201, which authorized a database to ensure loan companies don’t lend to borrowers who lack the means to repay.

In an email, Teri Williams, a spokeswoman for the Department of Business and Industry, said Monday that the long timeframe between the bill’s passage and implementation is due to a mixture of issues including the pandemic. 

“The delay was primarily due to operational disruptions and technology challenges because of the pandemic, which impacted the process and timing of hosting regulatory workshops, LCB (Legislative Counsel Bureau) review, the RFP process and the actual development and testing of the database prior to implementation,” she said. 

The Nevada Financial Institutions Division, which hosted virtual meetings regarding development of the database during the pandemic, hit some technical difficulties along the way that resulted in meetings being postponed and rescheduled, she added. 

“The initial workshop for the database was scheduled and the meeting was oversubscribed and people could not access the meeting so they had to cancel it and reschedule for 30 days out as required by law,” Williams said. “A portion of the delay can also be attributed to the commissioner vacancy at the division and the subsequent hiring of a permanent commissioner to shepherd the regulations through the process.”

Consumer rights advocates and legal groups have long pushed Nevada officials to take more action to rein in predatory practices by the payday loan industry. Even though they argued the state needed to do more, they supported the creation of the database. 

The initial regulations governing the database were finalized in November 2020, and included provisions to prevent customers from taking out multiple loans that exceed 25% of their income. 

Lawmakers approved the proposal 7-5 in a party line vote during a December 2020 meeting of the Legislative Commission, which approves regulations for state agencies.

Mary Young, the deputy commissioner for the Nevada Financial Institution Division, was asked during the hearing what the anticipated timeline was to get the database up and running.

She wasn’t able to provide lawmakers with a set timeframe.

Prior to the Legislative Commission’s vote in support of the regulation in 2020, former state Sen. Julia Ratti said there was an urgency for putting the database in place as quickly as possible. 

“This is a consumer protection bill that passed in the Legislature that we need to get in place sooner rather than later,” she said. “I’m already hearing from my constituents who are getting themselves into trouble. The idea here is there is some responsibility to not let individuals jump from one place to another and accrue more debt than they’re ever going to be able to pay off and become buried by that debt.” 

Republicans who voted against the regulations worried the proposal went beyond the scope of the legislation. 

The vote also garnered pushback from payday loan industry representatives, which had bemoaned the process since the Nevada Financial Institution Division began discussing regulations for the database earlier in the year. 

Assemblywoman Maggie Carlton, who also voted in favor of the regulation, said the database was a good way to collect data which would provide a better look at practices by payday lenders.

“I think this is a good step forward in just knowing what issues might be out there with this industry and being able to have a fact-based conversation about the behavior in the industry and those who access it for those short-term loans,” she said. “There is nothing in here about trying to get rid of the industry. We know it’s going to be out there for a while. We just want to know what’s really going on. If you can’t measure it, you can’t monitor it and you can’t regulate it.”

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