Georgia Payday Advance Lenders Defeated in Vote
The Georgia General Assembly voted 82-77 March 27 to pass House Bill 163 allowing payday cash advance lenders to return to the state, but it wasn’t enough to advance the bill out of the house and effectively killed it for this legislative year.
The bill would have allowed loans up to $750 or 25 percent of the total monthly income to Georgia residents, charging $15 for every $100 borrowed. This bill also included a clause forbidding companies to make a loan to a military member or family member.
Although critics argue “predatory lending” has a negative impact on the lives of service members and Georgian citizens, opinions vary when it comes to the controversial issue of guaranteed payday loan lending. Last year, Congress imposed a 36 percent annual percentage rate cap on loans to military members and their dependants after reports showed the check cash advance industry had a negative impact on the financial lives of most military members who use these services.
Proponents of the services also known as payday advance loans or deferred presentment services argue most individuals using such services are not poor welfare recipients or the unemployed but are “… ordinary, hard-working people who simply need some short-term cash from time to time to help cover an unexpected or unbudgeted expense,” as stated by Joe Thrash in the March 27 edition of the Walker County Messenger.
Thrash claims bad credit cash loans are a necessary service that banks do not provide, and that payday loans are not predatory and may actually enhance the economic welfare of households as stated in a report by Donald Morgan of the Federal Reserve Bank of New York. That report examined whether the term “predatory lending” applies to legitimate check advance service providers.
“On the whole, our results seem consistent with the hypothesis that payday lending represents a legitimate increase in the supply of credit, not a contrived increase in credit demand,” stated Morgan. He further stated in the report that rates and fees would decrease proportionally as the number of lenders increased.
Perhaps Morgan was more worried about his pocket book than he is about the results of fast cash advance lenders operating freely and in large numbers. Morgan obviously never heard of the lenders who used to crowd around NSB Kings Bay and other military installations as little as five years ago.
In 2003 the National Consumer Law Center (NCLC) had uncovered a concentration of predatory lenders around Kings Bay specifically targeting military servicemembers for their guaranteed paychecks and predictable budget patterns.
As a result of the serious risks associated with inflicting additional financial burdens on active duty personnel, a hearing was held to determine the legitimacy of Georgia State Senate Bill 157. Testifying to promote the bill was SK2(SS) Jason Withrow, a casualty of predatory lending at the time.
When Withrow was injured in a car accident in July 2003 and forced to quit his second job, he called the Georgia Catalog Sales, a local provider of cheap payday loans, formerly located right outside the Saint Marys gate on Point Peter Rd.
The result of him borrowing $300 was a $90 service charge, followed by additional charges when he was not able to pay back the loan. Unable to pay back the first loan, the lender continued to roll the loan every two weeks adding more charges and fees to the original loan. The debt quickly rose to $7000 after six months.
If that was not a clear case of predatory lending there are hundreds of other similar cases, some fringing on bizarre. For example, in the evidence used to pass Senate Bill 157, NCLC exhibited a contract with a company offering ten hours of Internet use per month with $300 in cash given to the customer who had to pay over $200 every month for limited use of the Internet until the personal loan with additional fees assessed was paid in full.
“Loan companies push debt on people without caring about whether folks can afford to pay it back,” said Alys Cohen, Staff Attorney with NCLC. “The companies profit either way, but many Americans are being buried under a mountain of debt. Policymakers must stop destructive lending and make lending fair again. People have the right to expect that.”