Interview with a Cash Advance Loan Critic
By J.J. CameronPayday Loan Writer
David B. Miller is a staff attorney with the Mississippi Center for Justice. He sat down with The Meridian Star last week and talked about the group's concerns over cash loan lendings.
The Meridian Star: Tell us about the Mississippi Center for Justice and your mission.
David B. Miller: It’s a non-profit law firm. Our main office is in Jackson. We also have a Coast office that does Hurricane Katrina work, and I’m in Hattiesburg with the Consumer Law Resource Center. We’ve got a staff of 12, with six attorneys. We have been open for about three years and do - generally speaking - civil legal advocacy on behalf of poorer, minority communities in the state.
The Star: What are the consumer law initiatives your firm is working on?
Miller: We are looking at bills particularly in two areas — payday lending and predatory mortgage lending.
A little background on bad credit payday loan lending. They have been regulated by the state since the 1990s. As of December of last year, there were 1,139 licensees in the state. There are an average of 12 per county. If you take thet 18 percent fee and annualize it, it comes out to about 470 percent annual interest. That’s a problem.
The other problem we see is that the location of these businesses tend to be in low-income communities; they tend to be close to military bases and on the Coast and on the river. They tend to be close to casinos, so they are praying on some pretty vulnerable people.
The Star: What do you want done about this problem?
Miller: You will hear some people argue that this is a necessary emergency service and we have to have it. If people actually use it as an emergency service, that might be a legitimate argument - which I still take issue with the amount of interest they charge - but certainly you can appreciate that people have a medical emergency and they have got to have somewhere to borrow money.
Again though, the problem we are seeing is that people aren’t using it as an emergency service; unfortunately we don’t have hard data on that because that kind of data isn’t collected under the statute. The only public data you can get now is through the Department of Banking and Consumer Finance, and there are two lines in their annual report that will give a snapshot as of December of the year of the report. For instance, it will say as of December, there were x number of licensees with x numbers of loans outstanding for x dollars.
They don’t tell you how much was loaned through the course of the year, they don’t tell you how many fees were collected and, more importantly, you can’t tell from that whether or not people are using cash advance loans as an emergency service. That is the kind of data we need.
The Star: What are their regulations? What do they have to do to become a business? How much interest they can charge?
Miller: They have to put up a bond for $10,000 and pay a cash advance license fee and have a storefront with a certain amount of space and pass a background check and that’s it.
The only regulation is that they can charge $18 charge per $100 charge, but their market doesn’t seem to have a lot of variety in it, everybody charges the $18.
The other regulations extend to having to put on the wall how much the fee is, having to keep individualized records of all the transactions. The kind of records and reporting that we are talking about, the payday lenders already have to do. They do it with paper files in their office, so the commissioner can come in and audit if he needs to.
What we would like is to see all that information put into a database where the commissioner could tell the Legislature for instance, there were 144,000 fast cash loans in December, but there are only 30,000 people taking them out. Or over the course of the year, there were 1.2 million loans but those were only taken out by 300,000 people.
The Star: Why is that information necessary?
Miller: The reason to get this information is because the statues that govern the industry are set to sunset in 2009, so we feel it is important for the Legislature over the next couple of sessions to take a look at the way this no fax cash advance industry is working and if additional measures are needed.
Some states have done away with them altogether. Georgia has, North Carolina has and Arkansas is looking at it.
In states where they do allow it, they have stricter regulations than we do. Things like there has to be a cooling off period between the payday loans; for instance, you have to wait seven days between paying off one and taking out another, or that you can only have two or three of these loans out at one time. If there was a database, the payday lender could look and say, sorry, Mr. Smith, we see that you have more than one loan out.
The Star: What else needs to be addressed?
Miller: The other bill we are interested in drafting is giving localities more control over the industry. The statue says localities can’t pass any more restrictive measures than what is in there.
But our position is, you let localities determine whether or not they are going to sell alcohol, you let them determine whether or not they are going to have strip clubs and if they are on the Coast or the river, they get to decide if they are going to have casinos, so I don’t think it is unreasonable to give them some power over whether or not, what we see as payday cash loan sharks, operating in their community.
We also are seeking to find other sources of credit, things like community credit unions. There are a lot of banks outside the U.S. that do micro-credit and find a way to make money on it. We are smart folks here and I assume we can find out a way to do that too.
The Star: What if someone takes out an online payday advance loan and doesn’t pay it back, what legal leg do these industries have to stand on?
Miller: It is a legal debt and can be referred for collection. The statute does allow for a certain fee that you can charge for that check you wrote being returned. In Mississippi you can’t use criminal process, but you can’t use that on debts anyway, but my understanding is it’s just like any other debt - you can get a property they might have or try to garnish their wages, that sort of thing.
