State: Moneytree Skirted New Limits

By Rachel Pritchett
rpritchett@kitsapsun.com
Moneytree Inc.’s five Kitsap branches will stay open despite a cease-and-desist order that the state slapped on the company this week.
Groundbreaking consumer-protection laws that went into effect in January limit payday-loan companies like Moneytree from making more than eight loans to borrowers in a 12-month period, lessening the chance borrowers will get in over their heads.
Moneytree, the state alleges, has found a way around the new law by allowing borrowers to use and then “rescind” small loans, and not count them against the eight-loan limit.
Moneytree allows the borrower to get one or more small loans, which the borrower then can rescind several days later for the purpose of getting a bigger loan, according to the order from the state Department of Financial Institutions.
The “rescinded” loan is removed from a tracking system, allowing the borrower to have a clean slate.
The state alleged that the practice gives Moneytree an unfair advantage over its competitors.
In its first cease-and-desist order under the new statute, the state ordered Renton-based Moneytree to immediately stop the practice and stick to the eight-loan limit.
Dennis Bassford, a Moneytree founder and now its chief executive, said his company has always allowed borrowers to rescind some of their small loans, and that he believes the practice doesn’t violate the new law.
Moneytree and DFI are “just interpreting the statute differently,” he said.
Moneytree nonetheless has stopped the practice, Bassford said.
Moneytree can appeal the cease-and-desist order, either through the courts or through an administrative law judge.
Bassford declined to say what the company will do, but said he would like the opportunity to argue what’s permissible and about what’s not under the new statute.
All Kitsap stores — one each in Poulsbo, Silverdale and Port Orchard and two in Bremerton — appeared to be doing a brisk business on a midday Friday.
Payday loans are short-term loans designed to bridge the gap between paychecks and provide means for some low- and middle-income workers to get through the month. The loans come with fees that translate to close to 400 percent annual interest rates and sometimes twice that with unlicensed lenders.
Besides the eight-loan limit, the new law limits the total amount borrowers can get in loans to $700 or 30 percent of gross monthly income, whichever is less.
It also sets up a new database to track borrowers loans taken from different lenders.
And if borrowers can’t pay back loans on time, payday lenders now must offer installment plans. The law also prohibits payday lenders from harassing borrowers who can’t pay.