Payday Loan Times

Hey, are you looking for advice about payday advances? Do you live in Southern Arizona? Then listen up!

You can register for a free training seminar to be held April 1. The city of Tucson is co-sponsoring the event for residents of neighborhoods that are part of the federally funded Weed & Seed program. Also sponsoring the session will be the Arizona Federal Credit Union and the United Way of Tucson and Southern Arizona.

The training is intended to educate residents about their finances and the financial resources available in their neighborhoods. Recent surveys in the state have contrasted between just which income bracket payday loan applicants fall into.

The nation’s largest payday loan company is considering closing its 30 stores in Arkansas, a move that a critics of the industry hope will begin a mass exodus of payday advance lenders from the state, according to the Arkansas News Bureau.

Notification of the decision by Advance America, Inc., to possibly pull out of the Arkansas payday loan business was contained in a one-paragraph note that was part of the South Carolina company’s 100-page quarterly filing with the Securities and Exchange Commission (SEC) on Thursday.

“The lending bank for which we market, process and service payday cash advances and installment loans in Arkansas will cease originating loans in April 2006 and will cease originating payday cash advances in June 2006,” Advance America said in its SEC filing.

Last month, following problems in North Carolina and Pennsylvania, Advance America said it was studying alternative methods for conducting business in the two states but had not determined if it would cease its payday loan operations — ones that brought in nearly $90 million in revenue in 2004 and 2005.

(Read on …)

As various states are urged to fight back against cash loans, these cash advances remain popular in a number of areas around the country. The following is a breakdown of payday loan activity across certain states (based on 2004 data):

• 1,027 loans per 1,000 residents
• 4.4 million payday loans
• 918 payday stores

As MEM Consumer Finance, Ltd., continues to grow, one of its brands, My Payday Loan has appointed Alister Comrie as its professional marketing consultant. His role will be developing an ongoing and comprehensive marketing strategy for My Payday Loan, including looking away from the traditional online advertising of the cash advance market.

“The online market has a limited number of users and My Payday Loan has a significant share of the market space for payday loans. There are many people out there who would benefit from a financial product which helps remedy short term needs who simply do not know the alternative exists,” Comrie said. “These people are having to pay additional charges on unauthorised overdrafts and credit card fees. A payday loan allows them to budget for outgoings the following month rather than struggle to find the cash for their immediate needs.”

My Payday Loan has made technological breakthroughs in recent weeks, and hopes to grow its business even more quickly with this hiring. Alister’s development experience over the past 15 years includes clients such as Boeing, Motorola, HSBC and Sony. He will be working on a variety of marketing projects for My Payday Loan and MEM Consumer Finance, Ltd., creating additional consumer awareness.

“People need to be aware that short term loans do not come only in the form of check cashing or the sub-prime lending market. Payday loans provide a lifestyle cash option for the prime and near-prime consumer to allow them to manage their finances on a monthly basis,” he said. “This is an extremely exciting market development and one that we can see delivering real benefits to the majority of the UK’s population.”

Former Democratic vice presidential nominee John Edwards said that payday loan companies should be more strictly regulated during a trip to Iowa over the weekend, writes the Waterloo-Cedar Falls Courier. Edwards said that payday advance lenders victimize Americans who are worried about things as basic as paying rent or feeding their families.

“They don’t have anything they can fall back on, so the result of all that is they’re just laying open and vulnerable for these predators to take advantage of them,” Edwards said.

Critics complain that payday lenders charge interest rates topping 300 percent, which can make paying short-term loans back a challenge, even though the terms are so short (two weeks is the standard).

Car-title loans are similar to payday loans, but require consumers to put their vehicles up as security. Those who cannot pay back the cash advance and high interest charges have their vehicles repossessed.

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In what is almost becoming a pattern, another legislature has called for a regulation on the payday loan industry in his state. In this case, a bill sponsored by Democratic Sen. Ray Miller of Ohio calls for a lower interest rate, lower fees, a shorter loan term and a ban on payday loans used toto pay off other loans. It also would require the state to create a database to monitor payday loan activity statewide.

“The real financial success of payday lenders depends on their ability to convert occasional users into chronic borrowers,” Miller said in a statement. “The key then is to establish barriers to user dependency.”

Ohio, with 1,383 payday loan stores, is third in the county in number of stores, after California and Tennessee. About 15 states have banned payday lenders or imposed interest-rate caps that ward them off.

In Ohio, payday lenders can loan up to $800 for terms of up to six months. Interest is capped at 5 percent per month on the principal amount borrowed on a faxless payday loan, and loan origination fees are capped at $5 for every $50 loaned. State law forbids payday lenders from making loans to pay off an existing loan from that company. (Read on …)

As the industry of payday loans grows more popular in the state, legislatures may consider limiting borrowers to a single cash advance at a time, a reform long desired by consumer advocates.

“Hopefully we can get enough support where we force (the industry) to come to the table and do something meaningful,” said state Rep. James Smith, a Richland County Democrat who is working with consumer advocates to write a bill.

The Charlotte Observer reported earlier this month that payday lending is on the rise in South Carolina, driven in part by bans on the high-interest loans in neighboring North Carolina and Georgia. The number of payday stores grew by 14 percent last year, and by 25 percent in the border counties of York and Lancaster.

S.C. law allows payday lenders to charge 15 cents for every dollar borrowed. On a loan due in two weeks, that’s an annualized interest rate of 391 percent. The maximum loan is $300. (Read on …)

According to The News Journal, payday loan applications are on the rise throughout Delaware. The payday advance industry in the state has grown from just a few hundred outlets a decade ago to more than 20,000 today. They lend an estimated $40 billion a year, usually in $200 to $500 increments.

“This market is incredibly dynamic,” said Matt Fellowes, a researcher at the Brookings Institution, a nonprofit think tank in Washington, D.C.

Fellowes and other experts spoke at a forum Friday at the University of Delaware titled “The High Cost of a Low Income,” which focused on the impact of payday lenders, check-cashing outlets and title-loan companies. Some of those businesses prey on unsuspecting consumers, and the high interest rates and fees charged by all of them can add up quickly, experts said.

Fellowes’ study of lenders specializing in payday advances nationwide matches The News Journal’s analysis of state and federal banking data, which showed that such financial institutions have become common in all kinds of Delaware neighborhoods.

In Delaware, 300 such businesses have taken their place alongside the 260 mainstream bank branches in middle-income neighborhoods and commercial districts throughout the state, data show. No longer confined to poor urban areas, they dot strip malls along Kirkwood Highway outside Wilmington, DuPont Highway through Dover and Del. 1 through Rehoboth Beach, with neon signs promising 10-minute approvals for borrowers with bad credit.

New Castle County is home to almost half of the state’s alternative lenders. About 84 percent of them are in neighborhoods where the median household income is between $30,000 and $75,000.

“These aren’t poor neighborhoods,” Fellowes said.

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An industry survey says Arizona payday loan applicants tend to be “middle-income” and educated, as well as a bit younger than the statewide averagse.

But Arizona census figures suggest otherwise, according to the Arizona Daily Star. Census data shows payday loan applicants tend to fall into lower income brackets, prompting critics to question the survey’s legitimacy. The survey’s results were compiled using 600 payday loan borrowers in Arizona, all of whom where contacted by The Community Financial Services Association of America.

Since Arizona legalized payday loans in 2000, the industry has been criticized widely for taking advantage of the vulnerable. But very few attempts have been made to establish who actually uses payday loans.

According to the industry’s interpretation of the survey, half of payday advance customers are middle-income — defined as an annual household income of $25,000 to $50,000. However, five out of six people surveyed claim to make less than $50,000, suggesting that payday customers are more likely to be low-income.
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During a crowded hearing in front of the House and Senate judiciary committees yesterday to discuss the state of payday lending in the state, law makers decided NOT to draft legislation that would change a seven-year-old law regulating payday advances.

A handful of witnesses contended the law is unconstitutional and called on the Legislature to either overhaul the Check Cashers Act of 1999 or write new law to get rid of payday lenders altogether. The act deemed that fees on payday loans would not be considered interest and, therefore, would not need to be capped based on the state constitution.

An industry supporter told lawmakers that better regulation, not eliminating the practice in Arkansas, was the answer.

“It is not the best thing in America, (but) the payday lending option is the cheapest alternative for consumers,” said Willie Green, who traveled from North Carolina to speak at the hearing.

Green owns seven payday lending stores in North Carolina, South Carolina, Florida and Kentucky. The Shelby, N.C., businessman urged lawmakers to propose legislation to curb bad acts, especially companies offering short-term loans over the Internet.

“If you eliminated the payday lender, the only alternative is the Internet. Who is going to police the Internet?” Green asked.
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