Payday Loan Times

A Senate committee Wednesday afternoon approved two bills to prevent payday cash advance and car title lenders from charging triple-digit interest rates.

The bills, already approved by the House, were sent for a vote on the Senate floor with minor amendments.

They expand a bill passed by the Legislature last year, though it does not go into effect until July 1. That bill limited payday lenders to charging a one-time fee of $10 per $100 loaned and no more than 36 percent annual interest on loans that are renewed or rolled-over. Payday cash loan lenders are limited to two rollovers. Oregon’s 360 payday lending stores make loans averaging about $300 for two weeks and charge an average 528 percent annual interest.

One of the bills passed by the Senate Commerce Committee, House Bill 2204, would extend the 36 percent cap approved last year to car title lenders, which use a car title rather than an upcoming paycheck as collateral in making small, short-term loans. Car title lenders also charge triple-digit interest rates.

A second bill approved Wednesday, House Bill 2203, would make out-of-state online payday loan and car title lenders subject to the 36 percent cap for loans made in Oregon. It also gives the state authority to create an electronic tracking system that would enable lenders to see if a person seeking money had loans outstanding with other lenders.

Everyone on the five-member committee, chaired by Sen. Floyd Prozanski, D-Eugene, supported the two bills except for Sen. Roger Beyer, R-Molalla, who said the bills restrict consumer choice.

The committee approved an amendment to the car title bill at the request of Rep. Tina Kotek, D-Portland, to prevent car title lenders from circumventing the 36 percent limit through sell-lease deals. Through such agreements, car title lenders buy a car from a borrower, who then leases the car and makes monthly payments to buy it back. The amendment puts such leasing agreements under the 36 percent cap that applies to cash loans, as well.

Bill supporters say the restrictions are necessary to prevent payday and car title lenders from taking advantage of vulnerable and desperate low-income Oregonians. Borrowers often roll over their personal loans repeatedly, paying high interest each time.

Lenders typically charge a total $240 for a $300 loan after three roll overs. Desperate borrowers also sometimes turn to a second lender to pay the first, and a third to pay the second, in a downward spiral of debt.

Payday and car title lenders say the regulations will put them out of business. Most borrowers like their services, they say, and those with poor credit will have nowhere to turn for money if the check cash advance lenders are forced to leave.

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File boxes stuffed with documents containing the personal information of fast payday loan customers were found in a trash bin Tuesday morning.

The trash bin off North Prospect Avenue in Illinois contained documents from Check into Cash, a company that issues payday advance loans. The bin, in an alley adjacent to the shopping center in which Check into Cash is located, contained boxes filled with hundreds of papers, such as consumer loan documents, account registers, collection notes, customer history reports and customer information sheets.

They included Social Security numbers, addresses, photocopies of driver’s licenses and other personal information.

“Wow. That’s something,” said Roberta Hazen, who with her husband, Roger, has taken out no fax payday loans from Check into Cash. “Why did they just dump it? Nowadays you should shred everything before you throw it out. They should have been more cautious.”

A Check into Cash manager who declined to give his name said the boxes were mistakenly thrown away and employees, when alerted to the mistake on Tuesday, promptly removed them from the trash.

The payday loan company takes privacy issues very seriously, and it is not company policy to throw out documents such as those found in the Dumpster, the manager said.

The company has initiated “a very thorough investigation process to find out what happened,” said Lauren Hosie, associate general counsel for Cleveland, Tenn.-based Check into Cash. “We’re taking steps now to remedy what happened,” she said.

The cash loan company has fired the employee responsible for the disposal of the documents. And it is in the process of notifying customers whose information was in the trash.

“This puts their customers at risk for identity theft,” said Paul Stephens, policy analyst with the Privacy Rights Clearinghouse, a California-based consumer advocacy group.

An identity thief could use personal information such as Social Security numbers to pose as someone else and open cell phone accounts, credit cards and other accounts. A state law that took effect in January makes it a crime for people to knowingly facilitate identity theft by throwing out information that the public could gain access to without shredding or destroying the information.

“The law states that you have to prove a person who was lax with these business records had the intent to commit identity theft or some violation of the Illinois Financial Crime Law,” said Champaign Deputy Chief Troy Daniels. The department does not have any plans to open an investigation into this cash advance payday loan matter.

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Payday loan and car title lenders turned out in force early Monday morning to tell a Senate committee why they oppose a bill that would put a 36-percent limit on consumer loans under $50,000.

“Thirty-six percent won’t work,” said Osjha Anderson of Atlanta, a lobbyist representing Georgia-based Northwestern Title Loans, which operates 16 car title stores in Oregon. “We will be gone. We’re not crying wolf. You will shut this industry down.”

People packed a Capitol hearing room and spilled out into the lobby to gather around television monitors during the hourlong public hearing, which began at 7:30 a.m. Many of them sported fluorescent green stickers that said “I Choose Payday Advance.” The Senate Commerce Committee will have a work session on the bill May 30.

House Bill 2871, which was approved by the House, is aimed at closing loopholes that payday and car title lenders might use to continue charging triple-digit interest rates, despite a 36 percent cap passed by the Legislature a year ago. Oregon’s 360 payday lenders on average charge 528 percent annual interest on small, short-term loans, typically for about $300 over two weeks.

Church representatives, food bank operators, consumer advocates, the Oregon Law Center and a lobbyist for the AARP of Oregon, the powerful retiree’s group, testified in support of the fast cash advance bill. Three out of four members of AARP support the bill, said Rick Bennett, the group’s lobbyist.

Jonas Monast, a lobbyist for the Center for Responsible Lending in Durham, N.C., said low-income residents with poor credit would still have access to small loans even if payday loan and car title lenders left the state. After payday lenders left North Carolina, he said, business doubled for traditional consumer lenders. Small loans are still available to people in the 34 states that have capped interest rates, in most cases at 36 percent annual interest, he said.

Most conventional no faxing payday loan lenders in Oregon, however, oppose the cap. It unnecessarily puts conventional lenders at a disadvantage with banks and credit unions that are bound by less restrictive federal regulations, said Paul Cosgrove, a lobbyist for the Oregon Financial Services Assoc. The group represents conventional consumer lenders, which make installment loans of two months or longer, unlike short-term payday loans.

Pam Sessions, who runs a payday advance lending store in Roseburg, said she supports a family of seven, including a disabled husband, and would face a 72 percent reduction in revenue under the 36 percent limit.

Payday loans work just as state lawmakers claim - for about 10 percent of the borrowers.

For the other 90 percent - around 386,598 Virginians in 2006 - the system sucks them in the same way neighborhood loan sharks did back in the day. Today’s borrowers may not get their legs broken, but they sure endure the pain and agony of rapidly escalating debt.

State lawmakers blew a chance in their most recent session to prohibit these loans or at least cap them with acceptable interest rates. As it is, with annual percentage rates reaching 782 percent, these loans are nothing short of usury.

On the campaign trail, lawmakers should be asked to explain their position on payday loans, as this topic will surely face them again come January.

Voters should get ready for half-truths and deceptions. Lawmakers will point to the state’s latest report and say that the marketplace is working, and people are figuring out themselves that online cash loans might not be right for them. As evidence: 12,354 fewer Virginians in 2006 turned to payday loans.

But that avoids the larger truth. The industry still saw the number of loans and amounts increase substantially despite fewer borrowers: 433,537 Virginians made nearly 3.6 million loans worth more than $1.3 billion.

To support these numbers, the industry lured in most of the borrowers so that they had to roll one loan into another - at an average $45 fee per pop. Some 96,831 people were so trapped that they took out more than 13 loans. And 12,486 Virginians that’s 38 percent more than in 2005 - were sued by easy payday loan lenders.

But lawmakers don’t want to see those people. Instead they concentrate on the minority of borrowers who take out just one loan.

They posture that these loans fill a real need when people are short on cash and hit a financial snag just shy of payday. Lawmakers like to pretend this, because they, too, have benefited from the phenomenal growth of the no fax payday advance industry.

Since the General Assembly legalized this brand of loansharking, campaign contributions from lending and consumer credit companies rose from $72,260 in 2002 to $399,776 in 2006, according to the Virginia Public Access Project.

And, unlike the industry’s borrowers, lawmakers don’t ever have to worry about paying the money back.

Except, of course, through their votes.

SOURCE: The Roanoke Times

Lawmakers deadlocked yesterday on whether to extend the state’s authorization for instant payday loans, creating uncertainty about the fate of a bill that would give new protections to borrowers.

Members of a House-Senate conference committee disagreed over proposals to extend, maintain or erase the current “sunset” expiration date of July 1, 2010, that’s in the state law enacted in 2000 to permit lenders to make payday loans.

Now offered through hundreds of businesses across the state, payday cash loans are for amounts between $50 and $500, excluding fees. They work by having a borrower sign a postdated check for an amount that includes both the money borrowed plus fees. At the end of the loan’s two-week period, the lender redeems the check for the face amount.

The industry and its supporters argue that payday loans fill a marketplace need for small loans for individuals facing a cash crunch. Critics say the industry’s practices results in exorbitant costs for borrowers who cannot afford to immediately repay the loans and end up renewing the loan.

Key provisions of the bill (SB1446), other than the sunset, include limiting a borrower to one savings account payday loan at a time, requiring lenders to check a database to verify that an applicant does not have an existing loan, requiring lenders that use the Internet to sign up borrowers to get a state license, and giving borrowers the right to repay a loan over a longer period than the original period.

As approved by the House on May 1, the bill would have erased entirely the 2010 sunset as part of a compromise in which the industry agreed to new restrictions on its lending practices and accepted new requirements to report to state regulators.

House conferees on Monday held out for that position, but the Senate conferees voted 2-1 to keep the current 2010 sunset so lawmakers can get reports from regulators and review the payday advance loan industry’s performance.

“We have very little information on how this industry is conducting its business,” said Sen. Debbie McCune Davis, D-Phoenix.

Including either proposed sunset would kill the cash advance bill, the end product of at least two years of work that saw the industry make a lot of concessions, said Rep. Bill Konopnicki, R-Safford.

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What more evidence do they need?

The state legislators who are so willing to do the bidding of a predatory business should check the latest evidence. The numbers for 2006 are in, and what they reveal is that the amount of misery and destruction wrought by faxless payday advance lenders is growing.

These short-term lenders tempt people in distress to take a step that too often pushes them down a financial rabbit hole, one it’s hard to climb out of. They prey on people in crises, with few resources. They charge fees that are flagrantly usurious: The average rate on a fast payday loan in Virginia last year, expressed as an annual percentage rate, was 368 percent, and they went as high as 782 percent.

No matter how the industry’s lobbyists spin it, these are Tony Soprano numbers.

Add in all these conditions, and you have a situation in which borrowers take on loans they can’t repay. So they roll them over, again and again, until their obligation grows so unsupportable it pushes them over the brink.

Legislators had plenty of chances this year to fix the mess they created when they invited providers of faxless payday loans into Virginia. They had good bills before them, to bring the interest rate down to a level that passes the conscience test, the same 36 percent that applies to other small consumer loans and to payday lending to the military.

While the payday lending industry likes to say it simply offers a solution to short-term needs that people should and do use prudently, the data prove otherwise. The typical Virginian who took out a guaranteed payday loan in 2006 ended up taking out 8.3 loans. Two-thirds of the 433,537 borrowers took out more than one loan.

While there were slightly fewer borrowers last year, they borrowed more money, and more often. That’s dangerous.

And 96,831 Virginians took out at least 13 payday cash advances - a condition that could be described as an addiction. That’s 96,831 pieces of evidence that the General Assembly is letting Virginians down, letting down those who most need protection.

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Phil Betourne works full time at a grocery store in Canton and makes enough money to, in his words, “get by.”

But Betourne is not getting by. He’s falling behind. His unpaid public utility bills are piling up and he is facing foreclosure on his home.

Each month, Betourne signs his paycheck over to payday advance lenders, but the money he makes doesn’t cover the interest owed on short-term, high-interest loans.

When his wife was involved in an automobile accident, and banks would not lend him money, Betourne took out his first loan with a payday lender. One quick cash loan led to two, and two to four and now Betourne has 10 going simultaneously.

“I feel so stupid, but what was I supposed to do? Go out and rob a bank? I did what I thought was necessary,” he said.

Betourne is caught in a vicious cycle of borrowing, repaying and then borrowing again.

His story is emblematic of a growing problem in Ohio as the number of families with these short-term payday loans now exceeds 400,000, feeding an industry that has grown from 107 store fronts in 1996 to 1,586 a decade later with profits exceeding $290 million, according to Policy Matters Ohio, a Cleveland-based progressive research organization.

Critics argue payday lenders pick the pockets of the poor and the financially vulnerable with usurious loan origination fees and exorbitant interest rates of up to 391 percent.

The industry says no fax cash advance lenders are catering to customers who have nowhere else to turn and the annual percentage rates are exaggerated and misleading due to the short-term nature of the transactions.

Lawmakers get involved
The debate is only expected to intensify in the coming months as private discussions have been initiated among the highest levels of government and a broad-based organization of church and advocacy groups has emerged to draw attention to Ohioans caught in a debt trap.

In a recent private meeting with some of the largest mortgage lenders operating in the state, Gov. Ted Strickland asked one of the participants, Larry Litton, why Ohio suffered from some of the highest foreclosure rates in the country?

“He (Litton) did respond that [instant payday loan] lending was out of control,” said Strickland spokesman Keith Dailey who confirmed the story.

“There’s some congruence on that opinion that payday lending is a concern on its face as well as potentially in relation to the foreclosure rates in the state,” Dailey said.

Strickland has asked Ohio Department of Commerce Director Kim Zurz to meet with stakeholders and consumer groups to review the situation. Tom Allio, executive director for the Catholic Commission of Summit County, is chairing the Ohio Coalition for Responsible Lending, a statewide organization of 28 groups.

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Each time 57-year-old Ruby Price had to take out a payday loan, it cost her dearly.

When she borrowed $400 from Advance America, the finance charge on five monthly payments, with no late fees, was $810. When she borrowed $750 from Check ‘n Go, she paid the loan off early, but the price tag still amounted to $1,191.

Then there was the cost to her self-esteem - both at the thought of how much she was paying and about how her credit union, CEFCU, had denied her a personal loan each time even though she’d paid back two auto loans without incident.

“When I was accepting these loans, I was thankful I could get them because the need was immediate, and I had no money of my own,” she said. “But I knew I was being taken advantage of.”

Price, who is supporting six dependents from the salary she earns as a nurse at a Bloomington nursing home, was among the speakers at an anti-payday lending rally attended by more than 100 people Saturday at St. Peter’s African Methodist Episcopal Church.

Illinois Attorney General Lisa Madigan, the keynote speaker, urged the state House to pass legislation already approved by the Senate that would make the Payday Loan Reform Act of 2005 applicable to all no fax payday loans that exceed an annual finance charge of 36 percent instead of only those with a term no longer than 120 days.

“Payday lenders depend on the borrower’s inability to pay off the loan at the end of its term, forcing the borrower to take out a new loan to pay off the old one, generating additional fees,” Madigan said. “They disproportionately market their lousy loans to women, minorities and members of the military.”

She also called upon financial institutions to offer alternative faxless payday advance loan products that can sustain families temporarily without “shackling them to a treadmill of debt.”

Cheryl Merkel, president of the Central Illinois Credit Union in Champaign, and Jeannette Sheets, manager of the CEFCU Decatur member center, then went to the podium to outline the alternatives they offer.

Central Illinois Credit Union has earned more than $8,200 in profits by offering to its members payday alternative loans at 21 percent interest since July 2005, Merkel said.

Only $300 can be borrowed initially, and repayment must be made within six months. Cash advance loan borrowers also are given the option of opening a rainy day account and receiving a $30 bonus for saving at least $10 per month for three months through automatic payments from their checking accounts.

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A bill targeting high-interest quick payday loan businesses faced some resistance but managed to win approval Thursday on a 4-1 vote in a key Nevada Senate committee.

The Senate Commerce and Labor committee endorsed Assembly Bill 478, with U.S. Sen. Warren Hardy, R-Las Vegas, casting the lone opposing vote. Other panel members expressed reservations about the bill, but voted to send it to the full Senate.

A few personal cash loan companies have continued to resist the bill sponsored by Assembly Speaker Barbara Buckley, D-Las Vegas, and passed unanimously last month by the Assembly.

Representatives of the businesses insist they are “installment lenders” that should be regulated differently. But the Senate committee rejected their amendments, which would have allowed them to continue to charge high interest rates for long periods.

All providers of payday advance loans charge high interest rates, ranging up to 900 percent, but under the 2005 legislation can only charge such high rates for 30 days. If a lender can’t pay back at that point, the lender must drop the interest rate.

State Sen. Joseph Heck, R-Henderson, said that the bill’s good provisions, including steps to protect the military from no fax cash loan lenders, were important. But he also was concerned about the bill.

“I think we’re going to wind up putting several businesses out of business,” Heck said. “We may wind up revisiting the measure.”

John Baird doesn’t want to live in a community of people embittered by losing their hard-earned dollars because they couldn’t get a conventional loan in an emergency.

That’s why the Decatur resident has been participating in a campaign to shut down companies that he says ensnare customers via Illinois payday loans with interest rates averaging 550 percent annually.

“This hurts good people who are working and trying to make it,” Baird said. “They may not have a good credit history, so they go to these places and don’t understand the predatory nature of these loans. Before they know it, they have huge balances due, and they lose their cars, even their homes.”

That’s why Baird, 61, a member of the peace and justice task force at Central Christian Church, joined a peaceful protest April 18 at Advance America’s office at in Springfield and why he will attend an anti-payday loan rally Saturday in Decatur, Ill., set to feature Illinois Attorney General Lisa Madigan.

“Payday loans can provide quick credit,” said Madigan spokesman Scott Mulford, “but they can be an expensive and potentially devastating way to borrow if an individual has to extend a loan through another pay period.”

Central Christian Church, along with St. Peter’s African Methodist Church and the Decatur branch of the NAACP, organized the event as members of the Central Illinois Organizing Project.

The organization also is pushing for legislation that would close loopholes in the Payday Loan Reform Act of 2005 by making it apply to all loans that exceed an annual finance charge of 36 percent, instead of only those with a term no longer than 120 days.

The Illinois Senate passed a payday advance loan bill last month, and the House has the measure under consideration.

Ian Schwab, an organizer with the Central Illinois Organizing Project, has spoken to Decatur’s Human Service Agency Consortium, among other local groups, to generate interest in the campaign.

He said efforts are also under way to get more area financial institutions to offer alternatives to payday loans - with the Central Illinois Credit Union in Champaign, Community Plus Federal Credit Union in Rantoul and Imperial Credit Union in Springfield being the only ones he’s aware of that do.

Another protest was held at Advance America in Bloomington April 28.

Jamie Fulmer, director of investor relations and based in Spartanburg, S.C., would not say whether the payday advance loan giant would send anyone to Saturday’s rally at the invitation of the Central Illinois Organizing Project.

He called the earlier protests “publicity stunts,” staged without warning to intimidate employees and not intended to open a civil dialogue.

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