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 following is a letter to the editor from The Kansas City Star:

It was gratifying to see some of our elected officials finally cracking down on the purveyors of payday loans.

Yet another denizen from the dark side of capitalism, taking advantage of the most needy and vulnerable Americans, has become big business. Folks who barely get by from one payday to the next are put in a hole, handed a shovel and told to keep digging.

They pay for “free” credit reports that tell them they have poor credit. Car dealers push “no down payment” auto loans with interest rates that make credit card rates look cheap. And on it goes — getting the most out of those who have the least.

What prompted me to write was the new warm and cuddly ad being run on behalf of the payday advance industry. Yes, these people have an association — the Commercial Financial Service Association. And they’re running ads cautioning us to take out our payday loan only for short-term emergencies. Like eating, maybe?

The first ad I saw ran behind a Mercedes ad on CNBC. The next time I saw it was during a mystery on BBC America. Is this the TV audience most likely to get an instant payday loan?

This isn’t about cautioning people about the pitfalls of payday cash loans. It’s a blatant public relations campaign trying to convince regulators that there’s no need for regulation. It’s trying to convince us that these are fine, upstanding businesses that would never, ever take advantage of working men and women needing a little help to get by for a week or two.

If you believe that, your check’s in the mail.

In The Walker County Messenger, Joe Thrash had the following, paraphased things to say …

I wanted to respond to Thomas Markham’s recent article concerning the Georgia payday loan bill that is being proposed in the Legislature.

First, I want to fully disclose that I have been employed in the check cash advance industry for the past six years, and before to my involvement in the industry, I did not have a great deal of knowledge about the service, and even shared some of Mr. Markham’s opinions. But, prior to moving into the industry, I did some in-depth research into the business, and found many of my preconceived ideas, like those presented by Mr. Markham, were both conceptually and factually inaccurate.

First, in respect to Mr. Markham’s views of the typical payday advance customer being poor, welfare recipients, unemployed, and so on.

In fact, the typical payday customers 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 required by law in most states where cash advance companies operate, the customers must have a steady source of income and an open and active checking account. Also, easy payday loan limits are set by regulations so that a customer is not loaned more than they can conceivably pay at the due date (the proposed Georgia law sets the limit at $750 or 25% of the total monthly income).

Additionally, he charges that the typical customer is “undereducated, who can’t read the fine print that says, “If you don’t pay off this loan next week, there’s an extra late fee charge, equal to one-quarter of the loan.” This is factually wrong.

As per the bill proposed in Georgia, as well as in the majority of states where payday advances is regulated by law, it is illegal to charge any additional late fees to a payday advance customer. Also, as a part of the Community Financial Services Association Best Practices for the Payday Advance Industry, and per the proposed Georgia law, if a customer is unable to repay a loan according to the additional contract, that customer will be given the option of repaying that loan over an longer period of time at no extra charge.

This is clearly spelled out in section 7-9-1 2 of the proposed law.

Mr. Markham also refers to the high fees of the same day payday loans. In actuality, as per the proposed Georgia law, the fee that can be charged is set at $15 per $100 borrowed (section 7-9-10, 8.e of the law). When comparing this fee to other potential charges, such as bounced check fees, overdraft fees, or late payment fees, payday advance customers realize that often this is the most economical choice they can make.

The representatives in the Georgia legislature who voted for the proposed law have taken the time to educate themselves on the payday leaning industry, and have learned that it is a viable short-term solution for many people.

Cash loans are not intended to be a long-term financial solution. However, for individuals who are facing immediate short-term, low-dollar cash needs, this kind of loan can provide a necessary service that banks just don’t offer anymore. These representatives also understand that right now in Georgia people that need this service are forced to turn to riskier or higher cost alternatives such as unregulated internet lenders or title pawn.

Throughout his commentary, Mr. Markham refers to Payday Lending as “predatory lending business.” A recent report by the Federal Reserve Bank of New York found that payday loans are NOT predatory, and may actually enhance the economic welfare of households.

Faxless payday advance loans are not for everyone, but they do play a necessary and desired role. These small, short-term loans provide hard working people with little savings and credit alternatives a reasonable and economical option for short term credit to meet unexpected expenses.

These loans are many people’s only source of convenient, dignified and understandable credit without the hidden fees or unexpected penalties that are too unpredictable for someone living on a tight budget.

In conclusion, they best way to help hard working people would be to legalize and regulate payday loans in Georgia. Regulation will assure that the service is marketed, controlled and used in a responsible manner. By continuing to ban this option, Georgia consumers are being robbed to their right to make their own financial decisions, and forced to go out of state, or even use other higher cost and riskier alternatives.

Hawaii payday loan lenders who offer short-term loans are eager to combat the image that they’re locking low-income borrowers into a cycle of escalating debt.

The lenders have teamed with consumer advocates and state lawmakers to establish regulations for the industry.

The move is meant to protect consumers with oversight by the Department of Commerce and Consumer Affairs, but check cashing companies think they’ll reap some public relations benefits.

Some states, such as Arkansas, have seen the number of cash advance companies exceed the number of McDonald’s franchises. In Hawaii, there are about 50 to 60 short-term lenders.

Hawaii is one of only four states that does not actively regulate the industry. It has laws that limit how much interest the lenders can charge, but there is no agency overseeing their operations.

There are, consequently, no accurate statistics on how many people are using the service in the state, nor are there data on whether the no fax payday loan services contribute to financial problems among borrowers.

“We haven’t seen the problem of payday lending here that some of the other communities on the Mainland have,” said Bruce Dillabaugh, deputy director of the Hawai’i Alliance for Community-Based Economic Development.

INDUSTRY CRITICIZED

Quick payday advance companies are criticized for offering short-term loans to low-income clients who can’t pay them back and, as a result, continue rolling them over to the point where they might be paying annual interest rates of nearly 400 percent.

Hawaii law allows lenders to charge a 15 percent interest rate on a loan for as little as 15 days. If a customer, for example, borrows $600 for 15 days, he would pay $90 in interest. If he can’t pay it, he can reborrow for another $90. If this cycle persists for a year, the borrower can end up paying $2,160 on a $600 cash advance loan.

House Bill 483 would prevent that from happening by offering borrowers an extended payment plan after four consecutive loans. The bill will have to be heard by the Senate Commerce, Consumer Protection and Affordable Housing committee by the end of next week to move forward this session.

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Interest rates on Arizona payday loans would be severely limited under a bill getting its first hearing today at the capitol.

Sponsor Marian McClure doesn’t like the businesses, but believes they are necessary. Her bill would eliminate the loan rollovers that boost cash loan online interest rates to stratospheric levels.

“Without payday loan stores, I believe we will go back to what we had before, which were loan sharks,” she said.

On the plus side, since payday cash advances were legalized seven years ago, McClure says she hasn’t heard of anyone getting their legs broken.

Her bill would also ban Internet payday lenders.

“That if you make an [online payday loan] in the state of Arizona, the transaction is void and you have no right to the principal or the interest. That should stop them, would you not think?”

McClure says there are already six companies in the state doing payday loans over the Internet. She hopes to regulate them, as well.

Rita Haynes, chief executive of Faith Community Credit Union, said people living paycheck to paycheck might be well advised to take out a short-term personal loan if the alternative is to miss a mortgage payment or not pay for needed medicine.

However, she said, “There’s no excuse for Ohio payday lenders to charge as much as they do … Ohio law just doesn’t protect the consumer enough.”

That’s why Faith, a credit union that serves anyone who lives, works or worships in Cleveland, designed grace loans. They have a fee of $25 for a $500 one-month fast cash loan - an APR of 17 percent.

Faith requires borrowers to set aside a little money in a credit union savings account (called a share account). The reason is simple: The difference between folks who take out bad credit payday loans and those who don’t might just be a savings account.

The Consumer Federation of America says that people who don’t have enough cash socked away to pay for an unexpected car repair or other emergency are more likely to turn to high-cost payday loans than people who save.

Haynes hopes the savings accounts will help wean customers off cash advance loans. Additionally, the credit union offers free budget and credit advice, as many community credit unions do.

On-time payments for grace loans are reported to credit bureaus, so consumers who pay off their loans are also building healthier credit. That could qualify them to take out traditional small loans, which are even less expensive and allow a longer repayment time.

SOURCE: The Cleveland Plain Dealer

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.

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The issues of payday advances in Georgia is far from dead, as the House remains split on the issue.

“Let’s limit government, let’s accept that people want to exercise their own personal responsibility - I know that’s a shocking concept - and let’s support the people of Georgia and promote their own freedom and interests,” said Rep. Earl Ehrhart, the chairman of the powerful Rules Committee, in a discussion about returning Georgia payday loans to the state.

Opponents countered that the lenders were outlawed because they trapped the neediest Georgians into an endless cycle of loans, and that repealing the ban will allow crooked companies to return.

“No matter how many revisions, no matter how many attempts to compromise, it still is a bad bill,” said state Rep. Virgil Fludd, D-Fayetteville. “It’s bad public policy to submit to take advantage of Georgia consumers who are in financial need. It’s bad public policy to lock consumers into a long cycle of debt.”

The proposal would limit customers to borrowing the equivalent of 25 percent of their monthly income and a five-day “cool off” period between fast cash loans that bans lenders from rolling them over from month-to-month. It also calls for a $1,000 fine per violation.

The payday industry has been clamoring to return to Georgia since the ban was enacted in 2004, saying there’s a need for their services from Georgians with credit so poor they can’t turn to banks for emergency funds. The lenders and their supporters argue that the measure is still one of the stiffest in the nation.

“This bill is about a free and open market and transparency,” said state Rep. Steve “Thunder” Tumlin, the Marietta Republican who sponsored the bill. “It does not turn back the hand of time. It brings forth new regulators and new regulations.”

Some also compared the quick payday loan lending fees to $25 fines that banks charge customers who overdraw from their checking accounts. “This happens every single day in the state,” said state Rep. Terry Barnard, R-Glennville, and a banker. “Get real. Vote for the bill.”

Critics, meanwhile, warned that Georgia is relaxing its payday lending restrictions as the federal government and other states are cracking down on the industry.

Last year, Congress imposed a 36 percent annual percentage rate cap on online payday loans to military service members after reports showed thousands of troops in debt to payday lenders.

At least 12 states prohibit triple-digit rates on payday loans, a cap that effectively bans payday lending, according to Jean Ann Fox with the Consumer Federation of America. Dozens of other states are also considering proposals to ban payday lenders.

“For once, we’ve done something very good in this state and other states are looking at us,” said state Rep. Carolyn Hugley, D-Columbus. “It’s time for us to stay the course and not look back.”

(more…)

Maybe you’d like a new way to take out a small payday cash loan without resorting to a shady lender.

The House has given tentative approval to personal loans up to $1,500 dollars, but instead of interest, you’d pay an upfront fee and a monthly handling charge.

Scottsdale Republican Michelle Reagan is the sponsor.

“It is a true free-market approach to reforming [pay day loan] lending,” Reagan said. “You keep hearing a lot of people in here say they want to reform the pay day loan process. Well, how can you when there’s no other options out there?”

Payday loans can exceed 300 percent interest. This type of loan tops out at around 130 percent. But Democrats say it’s just another way to exploit poor people with sub-par credit.

“We’re going through this whole pay day lending debate right now where we have these pay day lending markets all over our neighborhoods and now we want another type of lending institution to come in that provides similar types of loans,” said Democrat Steve Gallardo.

Members of the Missouri General Assembly have introduced bills to further regulate the growing guaranteed payday loan industry in the state, but controversy still surrounds the movement to standardize these businesses.

Missouri is home to 1,644 payday loan stores that charge an average annual percentage rate (APR) of 422 percent for short-term cash loans, according to a March 11 Columbia Daily Tribune article. New legislation would cap this annual rate at 36 percent, a move that would essentially eliminate payday loans in the state, according to the article.

Tony Garrett, manager of the Kirksville Advance America Cash Advance, said his company serves 150 to 200 customers at any given time. He said that despite the current payday loan debate, he thinks his business addresses a consumer need.

“I think we’re here for a reason, and I think that some people abuse that privilege,” Garrett said. “[But] there are some people that know the system and use it to the best of their abilities.”

He said his customers use bad credit payday loans to pay for unexpected expenses like car repairs, travel and past-due bills.

“Sometimes you need money and don’t have the cash for it right then, and if you go [to a bank], it could take you two to three days to get a loan,” Garrett said. “With us, it’s a same-day process.”

“I wouldn’t have been able to give my son a Christmas”

An Advance America Cash Advance customer who asked to remain anonymous said she used payday loans to make ends meet while raising her 3-year-old son. A single mother, employee and full-time student at Moberly Area Community College, she said she turned to cash advance online loans to afford car payments,gas, rent and groceries.

“In order to stay afloat, I had to [take out a payday loan],” she said. “I didn’t want to, but I had to.”

She said the high interest on payday loans is problematic, but the loans allowed her to pay for things she couldn’t afford otherwise.

“I’m glad they’re there or else I wouldn’t have been able to give my son a Christmas,” she said. “I don’t think they’d actually have these places if people didn’t need help.”

Steve Smith, professor of economics and business law, said the number of payday loan companies indicates a demand for their services. But he said opposition to quick payday advance operations arises because of high interest rates and the idea that the industry is “making a killing.”

“Frankly, also I think another reason you get opposition to payday loan places is because it’s good theater for a politician,” Smith said. “… There’s nothing better for a politician than to be able to pose - this is a somewhat cynical view, perhaps �- but to be able to pose as the protector of the little guy against big bad business.”

Smith said that although new legislation might help many individuals, it might also prevent some from getting the fast cash loan they need.

“You’re protecting them by basically taking an option away from them, and I don’t see why that is so great,” he said. “Another thing that can happen is if people are really desperate for money, they’ll get a loan anyway even if you pass those caps, but they’ll get it from an illegal lender.”

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