A proposed regulation in Nevada has consumer protection advocates concerned it could lead to vulnerable Nevadans falling victim to a “bait and switch” that would funnel them into taking out high-interest loans.

The state’s Financial Institutions Division (FID) held a hearing this week for a proposal backed by Dollar Loan Center that would allow licensed lenders to provide payday and installment loans from a single location, a practice not explicitly allowed in Nevada. 

Payday loans are short-term loans where people often receive immediate cash and agree to pay it back quickly with high interest rates. Installment loans have lower interest rates and involve more fixed and scheduled payments.

The proposal, initially drafted in March, came one month after Dollar Loan Center reached a settlement with the state in a yearlong legal dispute that moved the issue from the courts to the state’s regulatory process. The company has long wanted to offer installment loans in addition to high-interest loans, but state officials prohibited them from offering both, according to legal filings.

In a statement, Dollar Loan Center said the company’s efforts would save money for consumers and offer them more options when borrowing money. 

“In fact, it is surprising that anyone would be concerned about implementing a regulation that lowers interest rates and saves consumers money,” the statement said.

But during this week’s meeting and in interviews with The Nevada Independent, opponents argued it could lead to more people who need immediate cash but are ineligible for lower-interest loans being steered into a high-interest payday loan. 

“You get in the door, you’re desperate because, you know, your car broke down, you need a fix today … and they’re going to say, ‘actually, you don’t qualify for that loan, but we have this other product that you will fit,’” Jonathan Norman, an attorney with the Legal Aid Center of Southern Nevada, said in an interview. “And then you’re on the debt treadmill and you're never getting off.”

The FID declined to comment.

The regulation marks the latest dispute in Nevada over high-interest lending, a controversial practice that opponents say is predatory and supporters say fills a gap that normal lending institutions don’t fill. 

Multiple ballot initiatives seeking to eliminate high-interest lending in Nevada were proposed but failed to qualify for the ballot during the 2024 election cycle. Dollar Loan Center, which has dozens of locations in Nevada, donated $50,000 to a PAC opposing the ballot initiatives.

In 2023, Nevada had the fifth-highest average annual interest rate for payday loans at 548 percent, according to a report from the Center for Responsible Lending, a nonprofit that opposes the practice. From February 2022 to January 2023, around 150,000 payday loans were made in the state, about 15 percent of which were paid after the due date, according to a report by the state’s financial division.

Existing laws on payday and installment loans do not explicitly allow lenders to be licensed for both at a single location. They also largely prohibit the issuance of loans in an office used for other types of lending.

These laws were the subject of the lawsuit that Dollar Loan Center filed against the state early last year.

The lawsuit argued that FID Commissioner Sandy O’Laughlin “refused to even consider” efforts from Dollar Loan Center to provide installment and payday loans. The company already offers high-interest loans at a rate it says was much lower than state averages, and it wanted to enter the installment loan business as a way to offer consumers lower-interest loans.

The company contended the state prohibited it from offering both kinds of loans, either at a single or separate locations. If it wanted to become an installment lender, the company would have to surrender its license for high-interest loans, according to the lawsuit.

In its response to the lawsuit, the financial division defended its decisions, with its attorneys writing that the laws “conflict with each other and FID wishes to avoid steering the loans from one chapter to the next.” It also cited correspondence with the company that said its decisions were based on “the interest of consumer protection and the public interest.”

“[The] Complaint fails to provide a full picture of FID’s concerns and instead picks and chooses its facts in hopes that this Court will force FID to exercise its discretion,” the response said.

Now, after a settlement in the case moved the issue to the state’s regulatory process, the financial division will decide whether to sign off on the proposal. If approved, it would advance to the Legislative Commission, a panel of lawmakers, for final consideration.

Critics say that because the proposal would effectively amend portions of Nevada law, it should go through the legislative process, which often means more scrutiny.

“It can’t be that corporations can subvert our Legislature by going through regulations,” Norman said during this week’s hearing. “And I think that’s fundamentally what’s happening here.”