Payday Loan Times

Payday loans may not just be gaining popularity in America. An article on The Herald Sun recently discussed their effects in Australia, as well. The author also gave his take on the business of cash advances. It’s paraphrased below:

Last week I wrote about a micro-lending outfit called Amazing Loans. It is raising capital on the Australian Stock Exchange to take advantage of a loophole in Victoria and Queensland allowing it to charge huge interest rates and fees on payday loans.

The people who stand to lose from payday loans lenders are those who can least afford it. While lending has become a multi-billion dollar industry in the US, there are fears that Australia’s sinking savings rate may lead us down the same path.

The only practical solution is for the Victorian and Queensland governments to outlaw this practice. This will kneecap the loan sharks and protect vulnerable consumers. So one might think, that is.

(Read on …)

For the first time in its history, My Payday Loan held its first customer survey. One hundred customers were asked for their comments on the cash advance business.

The comments may have been surprising for those that have criticized the payday loan industry and payday loan companies. The responses ranged from praise for the ease of the service to dispelling some of the myths about short term borrowing. A couple of the customer comments follows:

“I normally budget for my month really well – I know what I’ve got going in and coming out so I know how much cash I’ve left to spend. That was until my car got pranged at a junction and I had to find £100 excess or be off the road until [my next paycheck] … I applied online, sent my paperwork across and was called later to be told my money would be in the account by close of business that day … Thank you, My Payday Loan for being there when I needed”.
- J.M, 31, Stockport

“My girlfriend saw this great deal for a weekend away but neither of us had the cash to afford it then and there … I don’t know why but I did a web search for “money before payday” and there were quite a few sites. My Payday Loan was by far the most professional and so I applied to them.  My girlfriend and I had a fantastic weekend away together and I was able to [the payday advance] back in one lump sum. It was all really easy as they took the payment automatically as agreed, so I wasn’t bothered by extra phone calls or waiting for cheques to clear before accessing my own money the following month”.
- L.R, 29, Cardiff

It was an idea hatched in Phoenix: why not spread out the locations of stores offering payday loans? The idea, supposedly, was that this would make it more difficult for individuals to acquire a cash advance.

Now, Nevada has joined in on the craze. Henderson, the state’s second largest city, is adopting new rules to curb the growing industry of payday loan lending and check-cashing centers. The area’s new ordinance expands the distance between the stores.

City officials say they’re concerned about the 31 payday advance businesses in town - including six that have opened in the last year and a half.

The Pittsburgh Post-Gazette is not exactly confident about the future of payday loans in Pennsylvania. After seeing two of the major cash advance ldners in the state exist, it would be difficult to argue with this point of view.

1. Advance America, which has more than two dozen locations in this region and is the largest payday lender in Pennsylvania, plans to stop making new payday loans after tomorrow.
2. Ace Cash Express, with almost two dozen stores in the area, has set June 30 as the deadline for halting payday loans.

The news is a victory for consumer advocates, long critical of the industry. Still, some see it as a loss for cash-strapped consumers who have nowhere else to turn in a pinch.

Consumer groups and others accuse payday loan lenders of preying on low-income and vulnerable people by trapping them in a revolving door of debt with flat fees that amount to annual interest rates ranging from about 400 percent to 700 percent or more.

“It’s textbook predatory lending,” said Jim Swoyer, a Harrisburg-based advocate for the Pennsylvania Public Interest Research Group, a leading critic of the industry.

(Read on …)

At 2005 drew to a close, the business of payday loans was booming out west. Colorado lenders were seeing more customers than ever.

Perhaps as a respond to this growth in popularity, the state has passed a payday loan act, officially known as the Deferred Deposit Loan Act.

This law allows individuals to borrow up to $500 for up to 40 days by giving the cash advance lender a post-dated check. In exchange for a fee, the lender agrees not to deposit the check until the date written on it. Up until that date, the borrower can pay the amount of the check and get it back from the lender.

The fee the lender can charge for a deferred-deposit loan is 20 percent of the first $300 and 7.5 percent of any amount over that.

Therefore, if a borrower wants the maximum loan amount of $500, the lender can legally require the borrower to sign a check for up to $575. If such a payday loan is made for the maximum allowable term of 40 days, the annual percentage rate turns out to be 137 percent.

(Read on …)

South Carolina is one of the more popular destination for those seeking payday loans. Unlike a few surrounding states, this area continues to thrive with payday advance locations spread throughout.

One of the more successful payday loan lenders, however, World Acceptance Corp., recently underwent a few shake-ups. For starters, chief executive Doug Jones has left the operation.

The announcement, made before trading started Friday, came one week before World Acceptance closes the books on its fiscal year 2006 and a week before Jones’ employment agreement is up for renewal. The Charlotte Observer covered the story.

A. Alexander McLean III, the company’s longtime chief financial officer, is replacing Jones as chief executive of this payday loan and consumer finance agency.

“We appreciate the contributions that Doug has made during the past six years, but the board of directors has determined that a change in leadership is in the best interest of the company at this time,” James R. Gilreath, chairman of the World Acceptance board’s Compensation Committee, said in a statement.

(Read on …)

Hey, did you hear that Advance America will be pulling out of Arkansas? Attorney Todd Turner did - and he coudn’t be happier about the news.

The company,which has 30 check-cashing centers in Arkansas and more than 2,600 nationwide, announced this week that the company will no longer be able to make payday loans through First Fidelity Bank of Burke, S.D.

Turner has filed several lawsuits against payday lenders on behalf of persons who have been charged more than 300 percent interest on loans. He’s won every suit, but neither he nor his clients have ever collected on those judgments because the companies either declare bankruptcy or cease operation in the state.

He and two of his clients testified before the Arkansas Senate’s Judiciary Committee last week. One of the clients told senators that she ended up paying more than $1,400 for a $500 check. Plus, the payday lenders are not always friendly, she said.

“They’ll threaten to take the check to the prosecutor and have you arrested for writing a hot check,” Turner said. (Read on …)

Against the wishes of consumer advocates tha feared Senate Bill 45 would roll back payday loan protections, The House of Representatives voted 79-16 to pass the legislation. It exempts state-chartered banks from most Kentucky laws or regulations that don’t apply to national banks.

Those laws include the High Cost Loan Act that legislators enacted in 2003 to protect consumers against predatory loans. It included some disclosure requirements and put limits on some fees, according to The Courier-Journal.

The Kentuck Bankers Association has said SB 45 is needed to erase a competitive disadvantage in selling second-mortgage loans. The High Cost Loan Act forbids state banks from financing the premium for credit insurance over the life of a second-mortgage loan, which can add thousands of dollars to a borrower’s outlay. Such insurance pays off a loan in the event of death.

Consumer groups say financing credit life insurance over the life of a 20- or 30-year loan is an abusive practice. They say many borrowers don’t realize how much it will cost them. (Read on …)

According to The Oregonian, four payday loan companies have filed a lawsuit challenging the new Portland law passed to govern them. The suit asks the Multnomah County Circuit Court to declare the city ordinance invalid on grounds it violates the state Constitution.

The four Oregon payday loan firms have also asked the court to bar the city from enforcing the law, passed last month, until the case is decided. The suit argues that Portland’s law conflicts with a state law passed in 2001 to regulate the short-term payday advance lenders.

“The state has pre-empted local legislation by adopting its own law earlier,” said John Junkin, a Portland attorney representing the payday lenders.

Portland City Commissioner Dan Saltzman called the lawsuit “shameful,” and said that the city took action because state law does not have caps on interest rates, and consumers need protection. The new Portland ordinance requires the 71 agencies in the city that issue payday loans to pay a $1,500 fee annually for a permit. They must also:

• Give borrowers a payment plan if they have trouble repaying.
• Collect at least 25 percent of a payday loan’s principal before extending it.
• Give borrowers up to 24 hours to opt out of a cash loan.

The payday loan companies filing suit are Evergreen Financial Investments Inc., based in Nevada, and three Oregon companies: Anyday’s Payday, Pacific Finance Corporation Inc. and Paycheck Advance.

Even as news about payday loans and possible regulations on them dominate the headlines, a couple companies appear to be doing quite well for themselves.

According to Marketocracy.com - which tracks more than 60,000 stock portfolios that are run by amateur investors - top analysts poured new money into small-cap financial services companies. Specifically, two of those top buys were companies that operate pawnshops and make payday loans:

1. Cash America International
2. EZCorp
   

What does this mean? The industry is still thriving in certain areas. It could be possible that if you find the right quick cash advance company, you can actually receive assistance from these cash advances.