Payday Loan Times

State Rep. Michael Thompson says it’s not the fees associated with South Carolina payday loans driving people into debt, it’s the number of loans they are taking out at one time.

Legislation that Rep. Thompson proposed this week would limit consumers’ borrowing to no more than $300 in 60 days and no more than six payday loans in a year. Cash advance companies also would have to grant customers a six-month repayment grace period with no charge and offer repayment plans to borrowers who can’t immediately pay back their loan.

“These things were never supposed to be a permanent fix in someone’s financial world,” Rep. Thompson said. “These were supposed to be a temporary fix for someone’s financial situation.”

House Bill 3831 would establish a statewide database to track consumers’ payday cash loans so borrowers couldn’t take loans from several different payday lenders at once.

Florida uses a similar database to regulate cash advance loans, Rep. Thompson said.

According to his bill, a fee of no more than $1 per loan would cover the cost of maintaining the database. The database would be established and operated by an outside company and the Board of Financial Institutions would oversee the system.

Companies that don’t comply with the faxless payday advance limits could face a $2,500 fine per South Carolina location, regardless of whether each store violated the law, according to the bill.

Payday lenders would have their license revoked for two years on the second offense. Consumer advocates are backing the measure, but industry representatives say it punishes responsible borrowers.

Jamie Fulmer, director of investor relations at Spartanburg-based Advance America, said his company is willing to work with legislators in creating “reasonable regulations.” But “arbitrary” caps aren’t an effective way to protect people who misuse their services, Mr. Fulmer said.

Without short-term, bad credit payday loan options, people are faced with paying bills late, bouncing a check or using an unregulated offshore Internet lender, he said.

James Wood, owner of Anderson Quick Cash, said his customers who rewrite loans do so because they are still working through a financial problem. But they stop coming in when they get back on their feet.

“The majority of customers, it’s not a lifelong thing like people think,” Mr. Wood said.

(Read on …)

A Senate panel voted Thursday to restrict South Carolina payday loan lending. The proposals would limit loans to five a year and decrease the loans’ limits to $400.

It would also require borrowers pay off one quick cash loan before getting another and set a seven-day wait between loans.

The Senate subcommittee did not change how much interest companies could charge; currently, the amount is $15 for every $100 borrowed. That’s an annualized interest rate of about 390 percent.

AARP in South Carolina says the number of cheap payday loan lenders in the state has more than doubled over the last five years. The group’s 2005 survey of credit counselors found that one in four clients had payday loans that were a major part of their credit problems.

Looking for some fast cash Monday, Tony Simmons stopped by a payday advance loan lending business on Rivers Avenue.

Simmons isn’t crazy about the interest rates tacked onto the loan, but he doesn’t want a proposal by Sen. Robert Ford, D-Charleston, to restrict the borrowing method that’s worked for him in the past.

“It’s a help,” said Simmons, a longshoreman from North Charleston. “You can’t complain. How else are you going to get the cash?”

Ford is looking to find a way to protect borrowers who might not be as savvy as Simmons from getting into a bad financial situation. He’s introduced legislation to regulate instant cash loan businesses, which opponents argue traps consumers in a cycle of debt, charging up to 391 percent interest annually on what often ends up as multiple loans.

“They are preying on people,” Ford said. “Once you get in the system, then you’re stuck in it.”Not true, argued Jamie Fulmer, spokesman of the Spartanburg-based Advance America Cash Advance, the nation’s largest payday lender.

“Consumers like this product,” he said. “Consumers understand this product. Consumers use this product responsibly. If they find themselves in a short-term financial bind, we help them get to the next paycheck.”

Ford’s bill, similar to a proposal that’s awaiting action in a House subcommittee, is set for further consideration in a Senate subcommittee this week. Ford first aimed to ban bad credit payday loans outright, but later agreed to seek additional regulations, including setting a limit on the number and frequency of loans.

John Ruoff, research director for South Carolina Fair Share, a Columbia-based nonpartisan group whose mission is to fight injustice and empower residents, said people should look anywhere else before borrowing from a quick cash advance lender.

“Take a deep breath and look elsewhere,” Ruoff said. “A place that says ‘Quick cash’ is probably the last place you want to borrow money from. There are other options.”

Payday lending charges $15 in interest and fees for every $100 borrowed. Personal loans are typically taken out for a two-week period, although some may be for a month. The typical loan is for $300, which results in $45 in charges, Ruoff said.

However, the businesses are most appealing to lower-income residents who are unable to pay off the first loan and, in turn, take out another to pay the first and a third to pay the second and so on, he said.

The loan results in 391 percent interest rate, or $1,173 in charges, if a borrower has an outstanding $300 on two-week online cash loans for each week for a year, Ruoff said. Nationally, he said, the average number of loans per customer is eight with a single company and a median of 13 loans per borrower.

Fulmer said the public deserves the option of selecting a borrowing method that suits the individual family, and payday lending is often less expensive than the alternative. Banks typically charge about $25 for bounced checks and an additional $25 charge from the merchant, he said. Credit card companies usually charge around $30 for late fees.

Fulmer said that lenders will also work with borrowers to work out a payment plan.

SOURCE: The Post & Courier

The faxless payday loan lending industry says it will be kinder and gentler to consumers.

They say they’ll spend $10 million on a campaign to warn people to borrow responsibly.

Don’t buy it. If you get caught watching the industry’s fist full of $10 million, you’ll miss what its other hand — loaded with a chunk of the other hundreds of millions these lenders are snatching from desperate, working-class consumers — is doing.

Payday cash advance lenders are spending lots of their immoral gain currying favor with legislatures and statewide elected officials, including those in the Palmetto State, as well as various community, civic and civil rights organizations.

Payday lenders have been throwing money around quite liberally over the past several years as consumer advocates and others have asked lawmakers — including our state Legislature — to rein in the industry that charges triple-digit interest rates on short-term bad credit cash loans that trap borrowers in long-term cycles of debt. S.C. lawmakers are considering several proposals, including two that would outlaw the practice.

Banning it would be the best answer, but lawmakers don’t seem willing to do that. The only compromise should be in favor of a bill that would cut the usurious 391 percent annualized rate lenders can now charge to 36 percent.

Consider lenders’ contributions in South Carolina. Over the past four years, payday and title lenders have contributed $157,032 to statewide candidates and lawmakers, according to the National Institute on Money in State Politics, a nonpartisan group that tracks contributions in all 50 states. (Search its database online at www.followthemoney.org.)

About 80 percent of those contributions appear to have come from easy payday loan lenders.

The top donor is South Carolina’s Advance America. The nation’s largest payday lender contributed $39,000 over the four-year period. Add in contributions by Billy Webster, one of its founders, and that amount rises to $49,882. The next-closest donor over the four-year period is Check Into Cash, which contributed $12,300 during that time.

The lenders spread money around to statewide officials and lawmakers in both major parties, but five people received well over half of the donations.

Between 2003 and 2006:

• Attorney General Henry McMaster received $33,000
• Lt. Gov. Andre Bauer got $23,250
• Sen. Tommy Moore got $25,500 during his run for governor
• former Treasurer Grady Patterson received $10,000
• Sen. Greg Ryberg, who ran unsuccessfully for treasurer, received $7,000.

These no fax cash loan lenders aren’t simply trying to help the best candidates win. They’re fighting to keep their gravy train rolling in South Carolina, where they can still rip borrowers off with little regulation. In South Carolina, they collect $186 million a year in fees; the figure is $4.2 billion nationwide.

(Read on …)

A Senate subcommittee chair today criticized the absence of the chief of the agency that oversees payday loans from attending meetings considering limits on the two-week, high-interest loans.

S.C. Sen. John Hawkins (pictured), R-Spartanburg, chair of the Senate Judiciary subcommittee that considers criminal law, extended “a most cordial invitation” to Dean Bratton, the commissioner of the S.C. State Board of Financial Institutions in charge of consumer finance, to attend the next meeting 9 a.m. March 29.

Bratton sent a lower-ranking staffer to today’s meeting, and the staffer said he is no longer involved with fast payday advance lending regulation.

“Why hasn’t Mr. Bratton been here at all these meetings?,” asked Hawkins, the subcommittee’s chair. “He shouldn’t be sending someone not prepared to help us with this issue.”

Bratton said he had a previous commitment that prevented him from attending today’s meeting, and he said he plans to attend next week’s meeting. He said he attended the committee’s first meeting March 1.

“It’s not that we’re not interested; we’re very much so,” Bratton said.

The panel is considering a bill introduced by Sen. Robert Ford, D-Charleston, that would make bad credit payday loan lending a crime. Hawkins has said he wasn’t likely to support a ban, but he was concerned about practices that can trap borrowers in a cycle of debt with multiple loans. Current law now allows lenders to make loans for as much as $600 at a time, charging $90 in finance charges, the equivalent of a 390 percent annual percentage rate on a two-week loan.

Hawkins proposed provisions Thursday modeled after a Florida law. It would require lenders to:

• Make no more than one $600 loan at a time to a customer
• Wait at least 24 hours before making another personal cash loan to that customer
• Consider the ability of borrowers to repay and enter each transaction in a database that would be monitored by state regulators to ensure the law was being followed.

Rep. Alan Clemmons, R-Horry, has introduced a bill in the House to limit cash advances. It is awaiting a second hearing.

They sometimes charge customers an annual percentage rate of 1,040 percent.

Of course they need to be run out of town.

Isaac J. Bailey of The Sun News talking about banks, not the frequently vilified payday lenders.

According to the Consumer Federation of America, if someone overdrafts an account by $100 and has to pay a fee to the bank and the merchant within a two-week period, which is typical of no faxing payday loans, it could amount to a 1,040 APR.

And to think, the S.C. General Assembly, like a growing number of legislative bodies, is up in arms because fast payday advance lenders charge customers up to a 390 percent APR.

Legitimate banks allow you to buy a $2 candy bar with your debit card but don’t tell you your account has already been overdrawn. And they charge you $20 to $35 for that purchase - even though they can simply decide to not let you make it.

Also, overdraft charges, through bank debit cards, average about $34, according to the Center for Responsible Lending.

People pay an average of $2.17 for every dollar borrowed through such “cash loans.” That’s the equivalent of paying $217 for every $100 of mistakes you make while balancing your checkbook.

• Legitimate banks charge you for using someone else’s ATM to retrieve your own money.

• Legitimate banks sometimes raise the interest rate on Credit Card A if you make a late payment on Credit Card B.

• Legitimate banks camp out on college campuses and target freshmen who don’t have the knowledge or discipline to handle responsibly, let alone the bank account.

There is hardly ever much good said about easy payday loan lenders, and South Carolina is home to the largest. But this is from a report by the Federal Reserve Bank of New York:

Using a small set of data, we find that payday loan rates and fees decline significantly as the number of payday lenders and pawnshops increase. Despite their alleged naivete, payday borrowers appear sophisticated enough to shop for lower prices. … The simple fact that payday lenders have triumphed over pawnshops suggests that payday lending raises household welfare by providing a preferable alternative.

If you make unwise financial decisions or mistakes or get caught in an emergency, most financial institutions will charge you dearly.

Not just instant cash loan lenders.

The following, paraphrased editorial is courtesy of The State:

“Lord, who shall abide in thy tabernacle? who shall dwell in thy holy hill? … He that putteth not out his money to usury, nor taketh reward against the innocent. “ - Psalm 15:1, 5

Uisury is banned by many religions, but it’s alive and well in South Carolina.

It’s called payday cash advance lending.

Shamefully, South Carolina law allows these lenders to charge fees that amount to an annual interest rate of 391 percent. Many of the borrowers who end up paying the outlandish interest are the poor, the elderly and minorities.

South Carolina payday loan lenders continually say they don’t target such groups, but studies suggest otherwise. The lenders say they target middle-income Americans, folks who make $25,000 to $50,000 a year. But it doesn’t really matter who their targets are. No one, whether they’re black or white or Hispanic, young or old, rich or poor, deserves to be subjected to a nearly 400 percent interest rate.

Payday lenders say they provide a needed service. They say their customers lack access to traditional forms of credit, although credit unions offer small loans at much cheaper rates. It’s even cheaper to use a credit card or go to a finance company.

Guarateed payday loan lenders seem to suggest it’s OK to charge an obscene rate because they cater to borrowers who are desperate and may have no where else to turn.

For centuries, the term “usury” described the lending of money for any amount of interest, no matter how small. But it has come to refer to the practice of charging excessive rates. The Bible doesn’t support usury; it’s considered a sin. Exodus and Leviticus prohibit instant cash loans with interest. Deuteronomy prohibits charging any interest. Consider these scriptures:

Deuteronomy 23:19, 20: “Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of any thing that is lent upon usury: Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury: that the Lord thy God may bless thee in all that thou settest thine hand to in the land whither thou goest to possess it.”

Leviticus 25:35-37: “And if thy brother be waxen poor, and fallen in decay with thee; then thou shalt relieve him: yea, though he be a stranger, or a sojourner; that he may live with thee. Take thou no usury of him, or increase: but fear thy God; that thy brother may live with thee. Thou shalt not give him thy money upon usury, nor lend him thy victuals for increase.”

Exodus 22:25: “If thou lend money to any of my people that is poor by thee, thou shalt not be to him as an usurer, neither shalt thou lay upon him usury.”

God calls us to use the resources he has given us to help people in need. But I don’t believe the Bible prohibits charging reasonable interest. In two parables, Jesus told stories about men who went on journeys, each of whom left a certain amount of his wealth in the care of multiple servants. In both cases, Jesus refers to the men’s expectation that their servants would invest their money in a bank or with exchangers to yield a profit.

(Read on …)

The South Carolina Department of Consumer Affairs (SCDCA) presents “Payday Lending, Title Lending And Mortgage Scams” on Tuesday as part of its monthly After Hours series.

The seminar will feature a panel of experts on credit counseling, payday cash loan lenders, and more in order to inform consumers about predatory lending risks and protection. The seminar will be held from 5:45 p.m. – 6:45 p.m. on the second floor of the South Carolina Department of Consumer Affairs located at 3600 Forest Drive in Columbia.

This After Hours program is part of an effort by SCDCA during National Consumer Protection Month to inform consumers about threats to personal finances. Many people consider cash advances to be counted among these.
Specifically, panelists will cover risks associated with mortgages, payday lending and title lending. Officials say victims of predatory lending often agree to high-risk loans, paycheck advances, or use a title as collateral to obtain short-term cash loans, which put the consumer in a worse financial position than when the loan was sought.

Lawrence Meyers is the co-founder of Payday Lender’s Capital, which provides financing for payday lenders. He penned the following, summarized article for The Independent Mail:

The guaranteed payday loan lending industry inspires much debate. Unfortunately, opponents couch this debate in emotion while rendering arrogant moral judgments rather than focusing on facts and basic economic reality.

Here are the facts: There is a need for short-term, unsecured credit. People living paycheck-to-paycheck have an occasional need for emergency cash. Options are limited. If you lack collateral, banks won’t give you a loan. Period.

So what happens if your car breaks down and you can’t get to work until it’s fixed? Will a bank lend you $300? A friend might, but asking may be embarrassing or not an option. Maybe you can get a cash advance payday loan from a credit union (if you’re a member), but that’ll take days if not weeks. You could write a bad check to the mechanic, but you’ll get dinged for $60 in fees.

Emergencies happen. That’s called “life.” A payday loan is a quick, convenient way to address emergency needs. They are neither the least nor the most expensive option.

Customers overwhelmingly endorse the product. There are 23,000 bad credit cash loan offices in the United States, assisting 12 million customers.

Now for the primary myths:

“Payday loans charge exorbitant fees.”

Exorbitant to whom? While opponents scream about “effective APRs,” they refuse to believe that customers don’t care about APRs. They care about flat fees. Period. Values are subjective unless you are a payday loan opponent and force your values onto the customer.

Opponents refuse to believe that consumers are actually smart enough to know what they are doing. They choose a payday loan because it is the right choice for them. It’s also worth nothing that between average default rates of 6 percent and monthly operational expenses of $9,000, fast payday advance offices require a minimum fee of $13 per hundred borrowed to generate any profit.

(Read on …)

Got an emergency and need a couple hundred dollars to get by? Don’t turn to fast payday loan lenders.

They aren’t the saviors they pretend to be. They charge an annualized rate of 391 percent interest and hope you can’t pay on time so you’ll keep renewing your loan and paying new fees.

Fortunately, claims that there aren’t any alternatives for consumers who need small, short-term loans are greatly exaggerated.

I called the South Carolina Credit Union League. Just as I anticipated, I found that credit unions — which can’t charge more than 18 percent interest — are a far better deal than the legalized personal cash loan sharks our state allows to prey on borrowers.

Frankly, just about any alternative is better than payday lenders. Ask your family or a good friend for help. Some companies will extend advances on pay to help employees get out of tight spots. Using a credit card would be cheaper than going to a faxless payday advance lender, even if the interest rate is in the upper-20 percent range. It’s even cheaper these days to use finance companies.

The Credit Union League conducted a quick, one-day survey of some of its members recently. It asked about products credit unions offer that could be used as possible alternatives to cash loans. The results from 21 credit unions showed they offer small loans that average $250.

The minimum amount that can be borrowed ranges from zero to $500. The interest rates range from 9 percent to 18 percent. The average rate is 16.26 percent.

Some have programs to help people get out from under payday loans. Most have been making small loans for years, since well before quick cash advance lending became the scourge it is. The credit unions stressed that their primary goal is to help people do a better job of managing their finances and avoiding debt traps.

Here’s what I learned from the CEOs of a few credit unions:

• Carolina Trust Federal Credit Union offers micro-loans up to $500 and gives members up to six months to repay. There is no credit check, but borrowers must have been on the job for six months and have direct deposit.

The credit union once catered to employees at large industrial and manufacturing companies, but now has a community charter and serves residents in Horry, Georgetown, Williamsburg and southern Florence counties. “We do quite a few of these and we promote them in our branches,” said president and CEO Jerry Miller. The program began 10 years ago, he said.

• Family Trust Federal Credit Union has long offered loans aimed at helping families in need. In the late ’70s, it served thousands of employees at textile and industrial plants. People could get a line of credit to buy tires, pay taxes or even go on vacation, said president and CEO Lee Gardner. Family Trust will soon begin offering a new personal loan product similar to a payday loan, with one big difference: It won’t be more than 18 percent.

The program will have a savings feature: 10 percent of what members borrow would go into a savings account and can’t be withdrawn until the payday advance is paid off. “There’s a forced savings habit in there,” Mr. Gardner said.

• Founders Federal Credit Union offers a range of products and services to help customers. It has no minimum loan amount. “We make lots of loans for folks to pay electric bills. We make lots of loans to buy groceries,” said CEO Bruce Brumfield.

That said, Founders’ aim isn’t simply to get someone out of a tight spot. It prides itself on helping members understand their finances so they can better manage their money and avoid trouble, Mr. Brumfield said. Founders employs three full-time counselors who give free guidance.

At any given time, about 300 to 400 members are in the program, which has served thousands over the past 12 to 13 years. The idea is to help people learn why they are struggling so they can correct their habits. “We believe it is an investment in our membership,” Mr. Brumfield said.

Founders has locations in Chesterfield, Chester, Lancaster, York, Spartanburg, Cherokee and Union counties. The credit union has an occupation-based charter — members include landscapers, doctors, dentists, local government workers and others.

SOURCE: The State