Washington State

Office of the Attorney General

Attorney General

Bob Ferguson

Mar 31 2015

Applauds President Obama’s push for federal reforms

SEATTLE — Attorney General Bob Ferguson today applauded President Obama’s recent push on a proposal to reform federal payday lending rules, while encouraging state legislators to reject a bill that purports to do the same thing.

Last week, Obama announced the Consumer Financial Protection Bureau’s proposals to crack down on payday lending that results in “debt traps.” The proposals would require lenders to do more to verify a borrower’s ability to pay or implement restrictions to foster affordability, as well as regulate collection practices.

“I’m glad to see a strong push at the federal level to reform a system that, in many instances, unfairly preys upon those in need,” Ferguson said. “Here in Washington, I encourage our legislators to kill the proposal before them now that, however well intentioned, will hurt the people it purports to help.”

Washington’s existing payday lending system already contains important safeguards for consumers, including the option for installment payments, which would be lost if the proposal — House Bill 1922 and Senate Bill 5899 — is adopted.

“In a time when our state and the nation are experiencing record income inequality, I cannot understand why we would seek out ways to aggravate the struggles of those trying to make ends meet,” Sen. Sharon Nelson said. “This industry is called predatory for a reason. They take someone’s moment of crisis and turn it into an opportunity to trap them in cycles of debt for their own profit. The system we have in Washington now is working — it is a model for other states, and it is exactly the kind of common sense consumer protections the president called for last week. In this case I say, ‘If it ain’t broke, don’t fix it.’”

In a Feb. 26 public letter to lawmakers, Ferguson expressed his opposition to the pending legislation and pointed out some of its shortcomings for consumers.

Simply put, the bill would make taking out these loans more expensive for most consumers. Only borrowers who proactively pay the entire debt before the second installment is due would save any money on the maximum $700 loan.

A borrower in Washington already has the option to convert his or her payday loan into an installment loan. Lenders are required to inform borrowers of this option, and the Department of Financial Institutions reports almost 15 percent of borrowers convert their payday loans into installments.

When a traditional “balloon payment” is due, a borrower can request an installment plan, and the lender must allow a plan of up to 180 days.

Importantly, the lender cannot add any additional fees or charges to the debt.

As an example, under the current system, a borrower taking out a $700 payday loan would pay a maximum origination fee of $95. If they request an installment plan, giving them up to six months to pay, their repayment would remain $795.

The proposed system before the Legislature would add other costs and fees. On the same $700 loan for six months, the borrower would pay 36 percent interest, a 15 percent origination fee and a 7.5 percent monthly maintenance fee.

If the borrower took the entire six months to pay, he or she could be on the hook for more than $1,195 — $400 more than they would pay today.


The Office of the Attorney General is the chief legal office for the state of Washington with attorneys and staff in 27 divisions across the state providing legal services to roughly 200 state agencies, boards and commissions. Attorney General Bob Ferguson is working hard to protect consumers and seniors against fraud, keep our communities safe, protect our environment and stand up for our veterans. Visit www.atg.wa.gov to learn more.


Peter Lavallee, Communications Director, (360) 586-0725; PeterL@atg.wa.gov