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The exterior of a MoneyTree branch in Carson City, as seen on Feb. 22, 2017. (David Calvert/The Nevada Independent)

The state’s Financial Institutions Division invited the public to weigh in Wednesday on the implementation of a state payday loan database, with detractors calling proposed regulations “burdensome” and supporters arguing they are the only way to protect vulnerable families from “predatory” lenders.

The database tracks high-interest, short-term payday loans with the goal of increasing transparency and providing lenders with information on an individual’s loan history with other lenders. It includes data on whether an individual has outstanding loans, as well as how often and many loans have been taken out, allowing lenders to ensure that an individual is not taking out combined loans exceeding 25 percent of their monthly income.

SB201, which required the creation of the database, went into effect on July 1. An initial hearing to gather public comment on the regulations was scheduled for April 29 but had to be called off after 30 minutes of comment and pushed back because of technical issues. 

Wednesday’s online meeting continued as planned, and, although no action was taken, more than a dozen individuals opposed to and in support of the regulations were able to provide public comment.

The most prominent criticism was the amount of data and types of information required. The regulations require a longer list of data points than were specified by the bill, and detractors say they are burdensome to companies and pose a security risk to those seeking loans.

Pat Reilly, speaking on behalf of Dollar Loan Center, testified that if the regulations aligned with what was initially authorized by SB201, the division would “have the support of all major licensees” and would be “able to power down that so-called debt treadmill.”

Julie Townsend of Purpose Financial, which operates 11 stores in Nevada offering a range of small loans, spoke to the risks customers may face as a result of the required data collection.

“The more unnecessary data collected in the database, the greater the privacy risk to the consumer, who would be vulnerable to identity theft, financial fraud and loss,” Townsend said.

David Raine with USA Cash Services, a business which offers cash advances and payday loans, among other services, said the burdens of the regulations would cause many lenders to “close their doors” and stop providing loan services, leaving families with fewer options.

“And, just as prohibition of alcohol turned many people to the speakeasies and such,” Raine said, “making it so that there’s no access to short term credit here in Nevada is going to turn people to the black market. They will go to unlicensed, illegal lenders online.”

However, supporters of the regulations see loosened restrictions as equally, and often more, dangerous to families. The proposed guidelines will allow lenders access to information on how many loans families have taken out and ensure that they are not going beyond the 25 percent limit. Those lenders will then have to “retain evidence” that they checked the database.

Supporters argued that this is vital to “protect consumers” and ensure the industry does not accidentally or knowingly allow individuals to take on more debt than they are legally allowed, leading to a “cycle.”

“I know that tonight, there will be kids going to bed hungry, because people in this industry gave their parents loans they knew the parents couldn’t afford to repay,” said Peter Alduous, staff attorney at the Legal Aid Center of Southern Nevada. “This database is not a burden standing in the way of responsible lenders, it’s a vital safeguard against exploitation of vulnerable people.”

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