A recent audit by the Nevada Division of Financial Institutions found that about one-third of payday lenders have received a less than satisfactory review in the past five years.
The Division of Financial Institution notes in its report that despite the high number, some of those with lackluster ratings were due to violations identified at other company locations that were determined to be issues company wide.
Mark Chappell is one of many who take out a payday loan. He borrowed money several years ago to help pay bills off.
"You're scrounging around just to pay car insurance and stuff anyway," says Chappell.
He was able to pay it back before his debt got out of control but it came with a high interest.
"I had that one experience and I would not do it again."
Attorney Tenille Pereira with the Legal Aid Center of Southern Nevada helps those trapped into a cycle of debt. The Legal Aid Center offers free counseling and assistance for those struggling with a payday loan.
Pereira says before taking that quick cash, know your rights if ever you're unable to pay it back.
"You do not have to enter into a new loan. It can go into default and give you the chance to get out."
Pereira tells 13 Action News it's not surprising one-third of payday lenders received a less than satisfactory review from the state.
While plenty of violations were found, the audit found that better follow up needs to take place after payday lenders are found with less than satisfactory reviews.
For example, 13 licensed payday lenders received a less than satisfactory examination rating in 2016. Only two follow-up examinations were conducted in 2017.
In addition, the audit also found that a centralized tracking system of payday loans could also be beneficial for the Division of Financial Institutions, payday lenders and legislators. It could help licensees track managing loans, determine loan eligibility, follow the law and prevent consumers from becoming overloaded with debt. The Division of Financial Institutions might also be better able to identify irregular lender activity.
Pereira agrees. "What has been put in place are great consumer protections, it's just not being complied with...There is a need for a database to track compliance. To make sure that we really do have compliance."
A payday loan database was considered in the 2017 legislative session but failed to pass.
A database could help with the inclusion of real-time licensee data, including loan inventories and check cashing logs. The Division of Financial Institutions would better be able to track potential violations ahead of an examination.
Nevada is one of 36 states to offer payday loans with 14 of those states using a database tracking system.
While the database did not pass in the 2017 Legislative session, other reforms did move forward. One of the key changes in AB163 was involving the "proof of ability to pay."
Right now, someone applying for a loan usually signs an affidavit saying can they pay back the loan, but sometimes there's no way to verify whether they can pay it back.
Under the new rules, lenders would be able to check for more information like bank statements and income to make sure customers can pay the loans back.
The grace period offered after a loan is issued was also addressed. The new rules prevent lenders from using the grace period as an excuse to raise rates to a high amount or to offer another loan to pay back the original loan, which can create a cycle of debt.
The legislator behind the bill, Assembly Edgar Flores (D-Las Vegas), told 13 Action News last May he hopes the Legislature will also address people shopping around to different loan companies to pay back multiple loans.