The Canadian Payday Loan Association (CPLA) this week applauded the British Columbia government for passing important personal cash loan legislation that will regulate the industry and balance consumer protection with a viable industry.
The new provincial legislation follows changes to the Criminal Code in May 2007 that now allow provinces - for the first time - the authority to regulate the payday loan industry as long as they meet the criteria of passing consumer protection legislation and setting maximum allowable fees.
The CPLA has been working with the British Columbia government over the past two years towards effective legislation and regulation on cash advances.
British Columbia’s new law includes many elements of the CPLA’s ‘Code of Best Business Practices’ - introduced two years ago and monitored by an independent Ethics and Integrity Commissioner to ensure adherence among CPLA members.
“The Government of British Columbia has shown great leadership in wanting to protect consumers and allow for a viable payday loan industry,” said Stan Keyes, President of the CPLA. “The CPLA will participate actively in all consultations on regulations and rate setting on behalf of our members.”
British Columbia’s new law effectively harmonizes the province’s approach to regulation with recent legislation in Saskatchewan, Manitoba and Nova Scotia. The governments of Alberta, New Brunswick and Ontario are expected to move forward with their own faxless payday advance legislation or regulations in the coming months.
A New Hampshire House subcommittee voted last week against a 36 percent cap on payday loan and title loan interest rates, endorsing instead an interest rate nearly 10 times higher that had been proposed by the industry as a “compromise.”
The full House Commerce Committee – which has long shot down interest rate cap proposals - is expected to endorse the position at the end of the month. But a floor fight is expected on the issue when the House session begins early next year.
The industry proposed rate for payday advance loans is $15 per $100 every two weeks, which translates into roughly 300 percent a year. For title loans (loans secured by a car title), the maximum rate would be $22 per month, or 266 percent.
These were the first caps proposed by an industry that had previously been hostile to any interest rate limits.
“It’s a good cap,” said Dick Bouley, a lobbyist with the Community Financial Services Association of America, a payday industry trade group. “We are not happy with it, but we can live with it.”
But opponents of the proposal said that the limits were not much more than what the industry was charging anyway.
“This will do nothing to stop the debt trap,” said Sarah Mattson, an attorney with Community Legal Services. “These caps won’t do it.”
State Banking Commissioner Peter Hildreth did not back the cash advance industry cap, instead reiterating his support for a 36 percent cap.
The payday loan bill informally endorsed by the subcommittee would replace a bill by Rep. Neal Kurk, R-Weare, that would have brought back the across-the-board anti-usury law that the Legislature scrapped in 2003. After the anti-usury law was eliminated, New Hampshire’s door was opened to the high-interest loan industry, and it quickly proliferated. Today it makes some 150,000 loans a year.
More than two years after a father and his two sons went to court in a bitter battle to control a Mason payday loan company, a Hamilton County judge has issued an order that puts tight controls on the firm’s finances and prohibits the alteration or destruction of company records.
The preliminary injunction issued by Common Pleas Court Judge Norbert A. Nadel is intended to maintain the status quo so that the company’s financial condition does not change substantially in the interim between when the order was issued and when the case is finally decided.
The order specifically prohibits CNG Financial from paying any dividens or making any other kind of payments to shareholders. The order also bars the company from borrowing any money other than funds that are routinely acquired to keep the fast payday advance business operating.
Nadel said Wednesday no trial date has been set and both sides are due back in court October 26 to determine when a hearing will be held on motions filed recently.
Allen L. Davis sued the company he created, CNG Financial, in 2004, claiming he did not receive all the shares he paid for when he exercised an option to buy a bigger stake in the company. He also accused his two sons, Jared and David, of mismanaging the company and using corporate funds to cover personal expenses.
At the time the suit was filed, CNG Financial operated about 800 Check ‘n Go stores across the U.S.
The payday cash advance lending firms, typically patronized by low-income people, have been frequently criticized for charging exorbitant interest rates to those who can least afford to pay them.
In Kentucky, for example, the fees charged for some of the company’s smallest personal loans amount to 460 percent per year.
Allen Davis, a former president of Provident Bank, later acquired by National City Bank, started the company with a single store at Fourth and Scott streets in Covington.
Today, it operates about 1,400 stores in 35 states and has about 3,000 employees. The privately held company had estimated revenues of about $360 million last year.
The three Davis family members and Cincinnati attorney David Rosenberg own all the company shares. The sons control it with a 60 percent stake given to them by their father.
Everest Metro Police in Wisconsin confirmed that someone has robbed the Payday Loans store in Weston on Friday morning.
A worker was getting ready to open the Pay Day Loan Store when a man walked in with a knife, jumped over the counter and demanded money.
This isn’t the first time this has happened to this same worker, as just three weeks ago she was held up and told police the robber is the same man who targeted the cash advance payday loan store before.
Everest Metro police responded to the call around 8:30 that morning.
The worker told police the robber held her up, then ran off with cash. The Everest Metro Police Chief says he suspects drugs are behind all these instant cash loan robberies.
Police Chief Dan Vergin said: “This isn’t because people can’t pay their grocery bills, and it’s probably is for one purpose, I’m betting it’s going to turn out to be drug abuse.”
Police are looking for a white male who was wearing a brown hooded sweatshirt.
Sacramento wants to stem the proliferation of quick-cash operations like payday advance loan lenders and check-cashing stores that officials say prey on lower-income neighborhoods, encourage blight and trap consumers in devastating spirals of debt.
The City Council voted unanimously Tuesday in favor of a 45-day moratorium on new stores, action prompted by a national focus on the industry and one official’s survey of its growth in her district.
“I view them as predatory lenders – legalized loan sharks, actually,” said City Councilwoman Sandy Sheedy, who represents the struggling Del Paso Heights neighborhood, where on one street, four such stores operate in a mile-long stretch, and two more have applied for permits.
“You don’t see them targeting wealthy ZIP codes,” she said.
Sheedy said the temporary halt on approving new no faxing payday loan lenders gives the city time to consider how a permanent ordinance might be structured. Other cities have required special permits and kept stores away from churches, parks and other quick-cash stores.
Since payday lending became legal in California in 1997, more than 3,500 stores have popped up in strip malls and street corners. City records show there are at least 61 payday lenders in Sacramento, many of them lining streets of lower-income neighborhoods, such as Del Paso Heights and south Sacramento.
The payday industry says it is simply offering customers a product they want, at a reasonable price. Even with the costly fees, industry officials say a cash loan is often the best option for a consumer who needs cash fast.
“A cash advance, a credit card late fee, overdraft protection – if you put all those next to each other, a payday loan often winds up being least expensive, and convenient,” said Greg Larsen, a spokesman for the Sacramento-based California Financial Service Providers, which represents the state’s payday lenders and check-cashing companies. “Consumers make the choice and this makes sense to them.”
Taking out a personal loan is, as the sign above Advance America on Stockton Boulevard says: “Quick, easy and hassle-free.”
SOURCE: The Sacramento Bee
Seeking to break “the endless cycle of debt and despair” caused by high-cost payday advance lending, a Wilmington nonprofit organization Monday launched an alternative program with low interest rates and longer terms.
West End Neighborhood House’s Worker’s Loan Program will provide short-term loans with 13.49 percent annual interest rates to compete with commercial lenders that charge rates equal to 300 percent or more annually, said Michael Fleming, a member of West End’s board of directors.
He and several political and community leaders gathered Monday at West End to formally kick off the program.
Borrowers will also get financial counseling and be able to pay back their quick payday loan over four pay periods, rather than the 14-day terms typically offered by commercial lenders.
The program is the first in Delaware to offer an alternative to commercial payday lenders, but others are being developed. Later this month, American Spirit Federal Credit Union in Newark will begin providing 30-day loans at 18 percent, and the Delaware Community Reinvestment Action Council expects to partner with a credit union next year to start a short-term loan program for Wilmington residents.
Nationwide, nonprofit groups, credit unions and banks are beginning to compete with commercial lenders.
Steven Schlein, spokesman for the industry group Community Financial Services Association of America, has said commercial lenders welcome competition but alternative lenders will find it impossible to offer cheaper loans.
The number of cash advance online lenders in the United States has grown from virtually zero before 1990 to about 24,000 today, Schlein said. The largest commercial lenders see relatively thin profit margins, he said.
West End worked with several banks, financial companies and other nonprofit agencies’s program to develop the program. The F.A.I.T.H. Center, a cooperative effort among several Wilmington churches, applied for the initial grant from the nonprofit Speer Trust to start the program.
According to The Wichita Eagle…
A program that allows no faxing payday loan customers more time to pay off their debt is now available at stores that belong to the Community Financial Services Association.
The extended payment plan is one of several new “best practices” that members of the association must meet to remain in the trade group, which represents about two-thirds of the industry.
Stores belonging to the association started offering the repayment plans Aug. 31. Customers can ask at each store if it’s a member.
The programs give customers at least four more payment cycles to take care of their loan. For example, if a cash advance were due in two weeks, the customer would get eight additional weeks if needed, at no additional cost. The association has been collecting information from member stores about use of the program in the past two months, said spokeswoman Lyndsey Medsker.
Most customers pay off their loans on time, said Tom Linafelt, spokesman for QC Financial, an Overland Park-based company that does business as Quik Cash. It has five branches in Wichita.
“For the few who do need to (use the repayment plans), they’re very important,” Linafelt said. “If they’re unable to meet the terms of their loan agreement, they’re thankful we have this safety valve for them.”
The association in February announced several new practices for its stores. The group also banned ads that promote payday loans for “frivolous” purposes such as vacations.
Quik Cash is owned by QC Holdings. Its president is Darrin Andersen, who is also president of the trade association.
Some consumer advocates say that while customers may pay off their payday advance loans in time, many are only able to do so because they get money from another payday lender.
Jeff Witherspoon, executive director of Consumer Credit Counseling in Wichita and Salina, said his group, which helps people with debt, has seen many people with multiple payday loans.
One client had 29 loans out at one time totaling $10,000, he said.
Witherspoon said he did think the repayment plans could be helpful to customers who have taken out several payday advances and can’t get them paid back.
He said the client with 29 loans filed for bankruptcy.
A growing number of the nation’s 9,000 credit unions are hoping to steer consumers strapped for cash away from costly faxless payday loans by offering less expensive alternatives.
There are about 24,000 payday loan stores in the United States and last year, about 19 million people used one, industry spokeswoman Lyndsey Medsker says.
He added that the bulk of those customers are satisfied. The process just takes a few minutes, including a quick check of a person’s bank account and pay stub.
But 32-year-old Felisha Wilbourne says fast cash loans aren’t worth it. She went to an outlet a few years ago when she was falling behind on her bills.
“They gave me $200, but I had to pay $275 back in the next pay period in two weeks,” she says. “That still left me in the hole, because once you give up that check you have to wait a two weeks for another check.”
Now Wilbourne uses Northside Community Federal Credit Union in Chicago. It’s one of many credit unions offering payday loan alternatives.
Ed Jacob, Northside’s director, says the credit union decided to offer an alternative after noticing that some members had taken out personal loans with interest rates over 600 percent.
Northside offers a $500 loan that can be paid back over six months, Jacob says.
For its part, the payday loan industry argues that bounced-check fees of mainstream lenders or credit-card late fees can be even more pricey than the interest on instant payday loans, if those costs are computed on an annual basis.
Leslie Parish, a researcher for the Center for Responsible Lending — which tracks lending practices — says that credit unions are making a good effort but they are no panacea.
Waynesboro has joined Staunton and Harrisonburg in the fight to cap payday loans, and the city also approved a referendum pamphlet at its Tuesday night meeting.
The Waynesboro City Council passed a resolution Tuesday night to ask the Virginia General Assembly to cap payday lending rates at 36 percent.
Staunton and Harrisonburg passed similar resolutions in recent weeks. Payday loans are short-term cash advance loans offered at high interest rates, mainly to people who need some money before their next pay day.
The resolution says the high interest rates target vulnerable people.
The city council is also moving forward to inform Waynesboro voters about what will be on the referendum ballot next month.
Residents will be voting on several projects in the city. The city council approved a pamphlet Tuesday night that will explain each project to the voters.
The council will use the general fund to pay for the printing and distribution of the no fax payday loan pamphlets, which will be given out in two weeks.