New Life For North Carolina Payday Loans?
By Desmond CarlislePayday Loan Writer
The North Carolina payday loan industry may be on life support, but it's still breathing. State officials and consumer groups are concerned that a new bill from a local lawmaker could resuscitate the industry, which was effectively killed off earlier in '06, the Charlotte Observer says.
N.C. Attorney General Roy Cooper, a Democrat who played a central role in forcing payday loan companies out of the state, said a bill sponsored by Rep. Beverly Earle, a Democrat from Mecklenburg, would permit lenders to begin issuing small personal loans to consumers — with interest rates that are too high.
"We shouldn't rush to replace payday lending with another product that could hurt people who have trouble making ends meet," Cooper urged.
Earle said her bill does not allow interest rates as high as payday loan firms charged, but does allow higher rates than the state maximum of 36 percent. Customers considered to be bad credit risks aren't eligible for unsecured loans, she said.
"There needs to be a vehicle out there where people can get small loans. The banks don't do it," Earle said.
Earle's legislation could breathe new life into the struggle over payday advance loans in North Carolina — right after state leaders, legislators and regulators spent years forcing the industry out. The major companies signed a legal agreement in March to shut down, three months after the state's banking commissioner ordered one agency to halt its operations.
Such businesses are part of a $40 billion industry that has grown rapidly in the past decade, catering to low-income and credit-risk consumers. In the normal circumstances, a customer borrows money they must repay after their next payday, along with a fee. A borrower getting $500, for example, might write a check dated two weeks later for $600 — an APR of more than 500 percent.
Consumer advocates argue that such lenders prey on customers, forcing them into debt. Industry reps counter saying that the business helps customers with no alternative. Many payday loan offices frequently operate in areas that the big banks ignore, the firms say.
Earle was approached about proposing the new legislation by CompuCredit, an Atlanta lender that agreed to stop offering payday loans in North Carolina earlier this year. She said her bill prevents lenders from taking advantage of consumers with rollovers and sending interest rates sky high.
"It is not payday lending. The interest rates are lower… as they rebuild their credit score. The interest rates go down," said Earle, who is willing to consider other proposals, but hasn't seen alternatives.
As Earle is part of the House leadership, the bill's chances there look good. But her legislation is sure to face stiff opposition in the N.C. State Senate. Senate Majority Leader Tony Rand, a Democrat of Cumberland, recently introduced legislation that he hopes will "drive a stake in the heart" of bad credit payday loans.
Chris Kukla of the Durham, N.C.-based Center for Responsible Lending said the type of loans Earle's legislation proposes is wrong for customers with money problems.
"This isn't credit that helps folks," Kukla said. "It's credit that puts people in a deeper hole than when they started."
It's hardly a secret that payday loan company executives have contributed thousands of dollars to N.C. legislators in the past. Earlier this month, Joe Sinsheimer, a former Democratic researcher, filed a complaint with the State Board of Elections over those contributions, alleging that members of the General Assembly may have obscured more than $60,000 in funds from payday lenders executives by omitting information or incorrectly identifying the donors.
