Payday Loan Times

News About the Ever Changing Payday Advance Industry

Court Upholds Georgia Payday Loan Ban

Filed under: Georgia — Paul Rizzo at 2:53 pm on Monday, May 14, 2007

The state’s highest court upheld the convictions Monday of two lenders charged with violating Georgia’s first-of-its-kind ban on no fax payday loans.

The Georgia Supreme Court, in a unanimous decision, concluded that state lawmakers had a “rational” reason to outlaw the short-term, high-interest loans when they cracked down on the practice in 2004.

Cash Advance Loan The court rejected legal challenges by Nathaniel Glenn and John Dunlap, two providers of payday advance loans who had been convicted of more than 40 violations. The two had argued that the law violated the federal equal protection clause, contending it singled out Georgia companies while ignoring other lenders based just across state lines.

In a six-page opinion, Justice Carol Hunstein ruled that the Legislature had a “rational basis for creating a class” of payday lenders.

Most fast cash loan lenders charge around $15 per $100 borrowed, pushing annual interest rates on two-week loans close to 400 percent. Borrowers who cannot settle up often “roll over” the loan repeatedly, leading to charges that quickly add up. The state banned payday loans in 2004.

Prosecutors claimed that the two lenders tried to skirt the law - which subjects lenders to stiff penalties for marketing the loans - by subtly changing their business practices after the ban took effect.

Dunlap, owner of First Cash Title, began calling the steep lending fee a “CheckGuard,” according to court papers filed by prosecutors.

Glenn, who owned Money Now, started allowing quick cash advance customers to purchase an option to buy a parcel of real estate he owned - essentially, “payday loans in disguise,” according to the brief. It added that no customers ever purchased the land purportedly up for sale.

The two were sentenced to more than 15 years of probation in one of the first successful prosecutions under the new law.

The Georgia Payday Loan Ban Works

Filed under: Georgia — Paul Rizzo at 6:03 am on Wednesday, May 2, 2007

Payday advance lending is a national problem.

But payday advance lending is not a Georgia problem.

In dozens of other states, where payday lending is legal, powerful payday cash loan lobbyists have convinced lawmakers to exempt their industry from existing state usury limits. Payday lenders in these states charge over ten times the interest that most banks and credit card companies are permitted to charge and they repeatedly roll-over loans, generating new fee income without extending new credit.

No Faxing Payday Loans

The fee income providers of bad credit payday loans make from rolling-over loans is the lifeblood of their industry. Loan fees cost borrowers in other states $4.2 billion annually. But not in Georgia.

For two years, Georgia consumers have been spared the crippling cost of paying triple-digit interest on payday loans. Georgia has saved its families over $350 million in hard-earned income since banning payday lenders in 2004. Most of that money would have otherwise gone into the pockets of out-of-state companies. Instead, working families have used it to pay for groceries, school supplies and heating costs.

Faxless cash advance lenders prey on our neediest citizens. While payday loans are marketed for meeting emergency needs, only 1 in 100 loans are made to borrowers who use the product once in a year. Ninety percent of loans go to borrowers who have five or more payday loans per year, and nearly two-thirds of total payday revenues are extracted from borrowers who take out 12 loans or more per year.

These types of numbers led researchers at the University of North Carolina to conclude that “the financial success of payday lenders depends on their ability to convert occasional users into chronic borrowers.”

In this report we find that:

* Georgia families save $147 million a year because the state’s usury rate cap prevents predatory pay day loan lending.
* The existing small loan market in Georgia thrives - with consumer finance companies making $473 million in small loans each year.
* Allowing no fax payday loan lending at triple-digit interest rates will only cause families to become trapped in a cycle of debt.

Georgia Payday Advance Lenders Defeated in Vote

Filed under: Georgia — Paul Rizzo at 6:25 am on Thursday, April 12, 2007

The Georgia General Assembly voted 82-77 March 27 to pass House Bill 163 allowing payday cash advance lenders to return to the state, but it wasn’t enough to advance the bill out of the house and effectively killed it for this legislative year.

The bill would have allowed loans up to $750 or 25 percent of the total monthly income to Georgia residents, charging $15 for every $100 borrowed. This bill also included a clause forbidding companies to make a loan to a military member or family member.

Personal Loan Online Although critics argue “predatory lending” has a negative impact on the lives of service members and Georgian citizens, opinions vary when it comes to the controversial issue of guaranteed payday loan lending. Last year, Congress imposed a 36 percent annual percentage rate cap on loans to military members and their dependants after reports showed the check cash advance industry had a negative impact on the financial lives of most military members who use these services.

Proponents of the services also known as payday advance loans or deferred presentment services argue most individuals using such services are not poor welfare recipients or the unemployed but 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 stated by Joe Thrash in the March 27 edition of the Walker County Messenger.

Thrash claims bad credit cash loans are a necessary service that banks do not provide, and that payday loans are not predatory and may actually enhance the economic welfare of households as stated in a report by Donald Morgan of the Federal Reserve Bank of New York. That report examined whether the term “predatory lending” applies to legitimate check advance service providers.

“On the whole, our results seem consistent with the hypothesis that payday lending represents a legitimate increase in the supply of credit, not a contrived increase in credit demand,” stated Morgan. He further stated in the report that rates and fees would decrease proportionally as the number of lenders increased.

(Read on …)

Georgia Cash Advance Employee Responds to Proposed Payday Loan Bill

Filed under: Georgia — Paul Rizzo at 5:57 am on Tuesday, March 27, 2007

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.

Payday Advance Store Location 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.

Georgia House Split on Payday Advance Loan Issue

Filed under: Georgia — Paul Rizzo at 4:46 pm on Saturday, March 24, 2007

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.

Cash Advance Loan Online “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.”

(Read on …)

Georgia Payday Loans: Not Coming Back

Filed under: Georgia — Paul Rizzo at 2:15 pm on Wednesday, March 21, 2007

In a rebuke to Republican legislative leaders, the state House defeated a measure late last night that would have allowed the return of Georgia payday loans three years after the region became the only state to specifically outlaw the high-interest short-term loans.

House lawmakers deadlocked the vote at 84-84, failing to reach the majority needed to erase the ban. The bill would have replaced it with a new system of two-week payday cash advances prohibited from accruing interest, but would allow operators to charge customers a fee of 15 dollars for every 100 dollars borrowed.

The fight isn’t over yet, as the measure could return next week.

Supporters, including a host of influential Republican leaders, say the ban went too far and forced out reputable companies that require customers to prove they hold a job and bank account. In its place, they say, is a void that’s been filled by illegal lenders or murky online payday loan sites.

We’ll have more on this story as it breaks.

In Support of Regulated, Short-Term Georgia Payday Loans …

Filed under: Georgia — Paul Rizzo at 6:06 am on Monday, March 12, 2007

The following is a paraphrased editorial from The Macon Telegraph:

Three years ago, the Georgia Legislature took a good look at the no fax payday loan industry, and it didn’t like what it saw. It didn’t like unscrupulous lenders targeting military personnel for high-interest loans. It didn’t like lenders trapping borrowers into situations in which they had to take out second, third and even additional loans to pay off earlier high-interest loans.

It saw that lenders weren’t taking into consideration whether or not borrowers had sufficient income to pay off loans. And to top it off, the Legislature didn’t like that, without any question, insufficient oversight of ethically-challenged lenders was giving the state a black eye. So, with justification, the General Assembly kicked payday advance lenders out of the state.

Georgia Payday Loan Ad

Now, however, lawmakers are considering whether, in banishing the payday lending industry, their action had the unintended consequence of removing the means for people who have little or no credit to obtain money to cover emergencies.The Legislature is considering a measure, House Bill 163, that, if approved, would authorize and license lenders that make short-term, unsecured loans. These bad credit cash loans would be made under strict rules and government oversight.

Georgians welcomed legislative action in 2004 that forced payday lenders to leave. But following a thorough inspection of House Bill 163, which spells out how and under what conditions short-term loans of one month or less could be permitted, as well as guarantees that would protect borrowers from predatory lending practices, we have cautiously - and we emphasize cautiously - come to believe Georgia might be right to test the water again.

This proposed measure is more restrictive than legislation permitting no faxing payday loans in states contigious to Georgia - Alabama, Florida and South Carolina - where Georgians cross state lines daily to secure short-term loans. The state would, through fees paid by lenders, have the financial means to police the industry and there are harsh civil and criminal penalties for violations.

(Read on …)

Georgia Payday Loan Debate Heats Up

Filed under: Georgia — Paul Rizzo at 3:31 pm on Thursday, March 1, 2007

The Georgia General Assembly tried for decades to push payday lenders out of business. But the purveyors of short-term, high-interest payday loans always found a way to survive.

That changed three years ago, when commanders at Georgia’s military bases launched an attack on payday lending and the General Assembly responded by shuttering the multimillion-dollar industry, which advances cash until a worker’s next paycheck arrives.

Today, the General Assembly is in the midst of a fierce debate over legislation that would bring Georgia payday loans back.

Payday Loan Application The state House is expected to take up a bill in the next week that would legalize the high-interest loans. House Bill 163, which has been gaining momentum in recent weeks, has been approved by the House Banks and Banking Committee.

Backers say there’s a market for the online cash loans, but the industry is strongly opposed by consumer advocates. Atlanta’s Clark Howard, the consumer guru who hosts a syndicated radio talk show, said he took two vacation days to testify against the bill at the Capitol.

“I’m just heartsick over this,” Howard said in an interview. “We in Georgia have been doing the right thing and now we’re about to do the wrong thing.”

The plan to bring back fast payday advance lending prompted emotional debates in committee hearings. It pitted two of the state’s top Republicans against one another. It also created waves among members of the state’s Black Caucus when the group’s chairman signed on in support of the bill.

The bill’s sponsor, Rep. Steve Tumlin (R-Marietta), seemed battle-weary this week. Tumlin has said that he introduced the bill at the request of the payday lending industry and believes the issue deserves consideration.

“Sometimes you take a job and you just have to finish it,” Tumlin said. “I have had bills that just felt good from day one to the day it’s complete. This one has been more of a job than a joy.”

Sky-high interest rates
Easy payday loan lending is legal and regulated in 37 states. In Georgia and 12 other states it’s either illegal or not feasible under the law, according to the Community Financial Services Association of America.

Tumlin’s bill would allow payday lenders to charge a fee of $15 for every $100 advanced. Customers would write a post-dated check for the amount of the loan plus fees, in exchange for cash. The loan would be due whenever their next paycheck arrives.

(Read on …)

Spokesperson Analyzes Georgia Payday Advance Bill

Filed under: Georgia — Paul Rizzo at 6:21 am on Wednesday, February 28, 2007

Niger Innis, National Spokesperson for the Congress of Racial Equality (CORE) writes a letter regarding House Bill-163 (HB-163)to Senators and Representatives in Georgia.

Niger Innis Below is the transcript of the letter Mr. Innis (pictured) wrote:

On February 1, 2007, the Congress of Racial Equality (CORE), a proponent of regulated short-term loans, met with Georgia state officials to discuss House Bill-
163. HB-163 ensures that the citizens of Georgia would have a safe and regulated cash advance option that gives them increased protections, averts loans from being frequently renewed and, if needed, provides a payment plan option.

Because Georgia prohibits payday loans, it is estimated that over 30,000 Georgia residents have crossed the border into South Carolina and Tennessee to obtain such loans. The pending prohibition of [bad credit payday loans] in other states would ultimately force consumers to cross state lines, use Internet entities or loan sharks to address small, but, special financial needs.

CORE believes that the out-right prohibition of short-term [quick cash loans] could have a negative effect on our country similar to that of prohibition in the 1920’s, which was a miserable failure.

CORE Officials have been meeting with state legislators and minority leaders across the country to promote CORE’s Financial Literacy Choice and Awareness (FLCA) program. The FLCA campaign advocates a better understanding of personal finances by informing the public of the pitfalls and opportunities of various financial options. Further, the FLCA campaign promotes alliances with government, industry and the non-profit community to foster financial awareness and literacy.

CORE believes people should be able to make their own financial decisions, and that they are best able to do that when they are financially literate.

Representative Al Williams, Chairman of the Georgia Legislative Black Caucus and Senator Margarita Prentice, Chairman of the Ways and Means Committee of the Washington State Legislator are strong supporters of CORE’s FLCA campaign.

The domestic application of micro–credit/short-term [check cash advance loans] -an idea conceived by the Nobel Prize winning economists Dr. Mohammed Yunus for impoverished communities in developing countries–serves as the blueprint for CORE’s FLCA campaign. CORE believes that with proper enabling legislation the micro-credit/short-term loan industry could help to close a critical gap in our economy.

Georgia Takes More Steps to Bringing Back Payday Loans

Filed under: Georgia — Paul Rizzo at 4:08 pm on Friday, February 23, 2007

Three years after they made Georgia the nation’s only state to specifically outlaw payday advance lending, state legislators moved another step toward allowing a return of the high-interest short-term lenders.

A House committee approved a plan Thursday to relax the ban and create a system of loans designed to cap fees at $15 for every $100 borrowed. The full House could consider the measure as early as next week.

Why the sudden about-face?

Lenders say the ban went too far, forcing out reputable companies that require customers to prove they hold a job and a bank account and leaving a void filled by illegal lenders or murky Internet sites.

Cash Advances Opponents sniff that the lenders were outlawed because they trapped the neediest Georgians into an endless cycle of loans, and that relaxing the ban will roll out the welcome mat for crooked companies to return.

The new measure would ban the quick cash loans from accruing interest, but permit lenders to collect up to a $112.50 service fee on a $750 loan, the maximum loan allowed. It also bans lenders from rolling over loans from month to month.

The committee passed the measure by a 17-11 vote, but not before deciding to lengthen a “cool off” period between loans from two days to five days. The measure passed over the objection of state Rep. Earl Ehrhart, an influential Republican, who warned that the move could be a “poison pill” for the measure.

The legion of faxless payday loan lending lobbyists in the packed committee room didn’t seem to mind. They’ve been clamoring to return to Georgia since the ban was enacted, saying there’s a growing need for their services from Georgians with credit so poor they can’t turn to banks for emergency funds. They argue that the measure allowing their return is still one of the stiffest in the nation.

“We’re asking for the most restrictive - we call it humble - bill so we can come back,” said Jabo Covert, a lobbyist for Check into Cash, a Cleveland, Tenn.-based lender. “You can’t stick your head in the sand and think that the demand went away, the customers went away and the need for short-term loans has vanished.”

With the good also comes the bad, warned Joe Mulholland, a south Georgia district attorney who used the cash advance online ban to convict lenders on criminal charges.

“We’re not dealing with companies that try to uphold the law,” he said. “They’re trying to go around the law anyway they can … We’re not talking about good, strong companies. We’re talking about loan sharks.”

Consumer advocate Clark Howard, a syndicated radio host, told lawmakers Georgia is poised to loosen payday lending restrictions even 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 payday loans to military service members after reports showed thousands of troops in debt to payday lenders, many of which are clustered outside bases.

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 legislation to ban payday lenders.

“Georgia’s the only state I know of where payday lending is currently not legal and the Legislature is actively considering making it legal,” she said.

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