Tuesday, July 26, 2005

Atlanta, GA — Lawmakers thought it was the end of payday lending in Georgia when they voted last year to outlaw payday advances. Any companies marketing the short-term, high-interest loans would be hit with hefty fines and up to 20 years in prison. The law was even upheld in the federal appeals court in June.

Since then, however, some wily lenders may have found brash new ways to flout the legislation, said lawyer and former Gov. Roy Barnes. In the latest trend, lenders ask customers to put up a household item - like a microwave, toasters or home electronics - before they can get a cash advance. The item is then leased back to them, but not before a consumer writes a check for the loan amount plus a finance charge, according to the complaint. If the loan isn’t repaid when it is due, the borrower is forced to negotiate another advance, buy an extension or risk bouncing the check.

Barnes filed a lawsuit last week in Clayton County Superior Court challenging the lenders’ new practice. “This is really nothing more than a new name for an old game,” he said.

His client, student Melony Reid, put up her computer and printer for a $500 loan from the defendant, USA Payday, which owns a string of lenders in the state. After extending her payments several weeks, she owed $675 in finance charges plus the principal loan amount.

Reid’s lawsuit is the latest in a flurry of litigation attorneys have filed against lenders since the law was enacted in May 2004. Barnes’ firm filed a rash of lawsuits last August accusing 60 businesses and individuals of violating usury and racketeering laws.

This entry was posted on Tuesday, July 26th, 2005 at 9:51 am and is filed under Georgia.