Several local short-term loan businesses in the Flathead are shutting their doors after voters passed an initiative capping the interest rates they can charge their customers.
Shelley Gould of Red D Cash in Evergreen said she will be closing after 10 years now that I-164 is in place, putting herself and another employee out of work.
“This is really, really a travesty,” Gould said. “(It’s) knocking on the door of free enterprise – shut down free enterprise if we don’t like what they’re doing.”
Introduced after multiple attempts at similar caps on rates failed to pass in the Legislature, proponents of I-164 argued that so-called payday lenders engaged in “predatory” loan behavior.
Since the lenders were allowed to charge fees worth 25 percent of the loan, this equaled an annual percentage rate (APR) ranging from 300 to 600 percent on the borrowed funds, the proponents said, which could trap people in a cycle of debt.
The initiative capped interest rates for payday lenders at 36 percent, a level that Gould says she cannot charge and stay in business.
A Red D Cash customer used to be charged $17.65 for an unsecured, $100 loan, according to the business’ website. Now, lenders say they would earn $1.38 for the same loan under the new interest rate cap.
Gould said payday lenders were already tightly regulated by the state, limited to loans of at least $50 and not to exceed $300. She also said payday lenders rarely charged the full 25 percent interest allowed by law.
Bethany Osborn, manager at National Quik Cash, said her business would no longer be issuing loans.
“Otherwise, our plans are pretty bleak,” Osborn said.
At Title Cash, Sarah Lefeuvre said the Kalispell branch of the national chain would stay open for six months to collect interest payments, but some customers are already feeling the pressure.
“A lot of people, their payments are jumping up and they’re getting angry,” Lefeauvre said.
She said Title Cash has about 350 “good customers.” Lefeuvre has worked at Title Cash for two years, and is now faced with finding a new job in a tight market.
“I’ve been looking for work, and there’s nothing out there right now,” Lefeuvre said.
Though she does not take the vote personally, Lefeuvre said she is convinced voters did not fully understand what I-164 would mean for payday businesses.
“I really don’t think people understood what they were voting for,” she said. “A lot of people don’t realize we help all sorts of people. And all they’ve done now is eliminate choices.”
In preparation for I-164’s passage, the local Check n’ Go stopped providing loans on Oct. 20, according to manager Alyssa Blasdel, and the store will close its doors on Nov. 19.
With several branches throughout Montana, Blasdel said there would be 15 to 20 people out of work. Though she is worried about her job prospects, Blasdel also said she is concerned about her customers.
“It’s not like we force them through the door. They come here because they need us,” she said.
Blasdel also said that voters did not understand the nature of the payday lending business; they are short-term lenders, so annual percentage rates are misleading. According to state law, the term of a deferred deposit loan cannot exceed 31 days.
Annual percentage rates would only apply if a person came in every two weeks to re-loan, Gould said, which is rare.
“If I see someone getting into a habit, I ask them to buy it down, take less each time,” Gould said.
Gould said she wholeheartedly believes in the initiative process, but she would like to see initiatives written more clearly for voters.
“I think they were massively confusing,” Gould said.
Flathead Job Service is running a rapid response for local payday lender employees, according to manager Bill Nelson, which includes help with unemployment benefits and various classes to aid with the job hunt.