Payday Loan Times

According to The Providence Journal, state regulators this week denied an application from a national chain, Check 'n Go, to open a store in the Olneyville neighborhood.

The ruling, signed Tuesday by the state's director of business regulation, A. Michael Marques, followed an outcry from local businesses and community groups, which argued that the proposed cash advance payday loan outlet would be harmful to the financial welfare of Olneyville, one of the city's poorest neighborhoods.

Payday loan lenders, typically, differ from traditional check-cashing services, which charge a fee for cashing payroll, government or personal checks. In Rhode Island, however, both check-cashing services and payday lenders are licensed as check-cashers, regardless of whether they provide payday loans or not.

Check 'n Go, a subsidiary of the Ohio-based Eastern Specialty Finance, operates 1,320 offices in 35 states - including two in Rhode Island.

Past payday advance approval: In April, state business regulators approved licenses for two Check 'n Go offices - one at 1565 Post Rd., Warwick, and another at 1500 Diamond Hill Rd., Woonsocket.

But an application for a third location to provide instant cash loans - at 579 Atwells Ave. in Providence - prompted a response from local check-cashing businesses and community groups.

(Read on …)

Alan L. Feld is the Maurice Poch Research Professor at the Boston University School of Law. Let's just say he isn't a major supporter of military payday loans.

In a recent article in The Providence Journal, Feld discussed the major drawback of these cash advances: if a sailor is unable to pay off the loan could actually lose his security clearance, based on of financial mismanagement of personal debts. Without clearance, the sailor cannot be deployed overseas. It's not difficult to see how severe this can become.

For many reasons, military personnel are high profile targets for providers of faxless payday loans such as these; they're often financially unsophisticated and far from family and friends. With full disclosure of the interest rates and compliance with Rhode Island's licensing requirements, a payday loan service can operate within the law here.

So, how can military payday loan problems be fixed? In one approach to the situation, Congress could prohibit high interest rates and set a limit on how much instant payday loan services may charge. A Senate amendment recently added to the Defense Authorization Bill of 2007 would cap the interest rate for loans to armed services members and their dependents at 36 percent; the interest-rate limit must still pass the House before going to President Bush for his signature.

(Read on …)