Payday Loan Times

Cash Now Corporation is a pioneer in the instant payday loan industry. Adding to its impressive resume, the company recently announced that new Master Licenses, called Enterprise Premium Solution Packages, are now available within the Australian Market.

Such Master Licenses meet the needs of firms and entrepreneurs that intend to establish multiple Points of Presence for payday loans and a variety of related financial services, either through sub-licensing Cash Now services, or development of their own retail and/or Internet network.

A further explanation: The Enterprise Premium Solution package provides a full and comprehensive suite of financial products and services related to the quick payday loan business, including software, hardware and retail store location products. The Master Licenses are designed to meet the current and future needs of licensees as they grow their businesses and expand on a geographic as well as product portfolio basis.

The package provides full back-office functionality, which not only allows real-time analysis of all activities within the Master Licensee's network, but also includes full ongoing support by the Cash Now's centralized IT infrastructure. Any problems with online payday loans can be readily dealt with.

Cash Now boasts many advanced proprietary applications designed specifically to serve the needs of this unique and rapidly growing industry, including online loan application and evaluation software, which can assess credit ratings based on sophisticated algorithms.

John Falting, Chairman & CEO of Cash Now Corporation, commented on the expansion:

"The Australian and New Zealand markets are very promising. Our revolutionary licensed approach to the payday loan business provides truly 'best of breed' software solutions and retail training systems that allow new licensees to quickly deploy a full-service, multi-product line of products and services that are at the leading edge of the industry."

Amilita Opie, who lives in Buckingham, Va., didn’t have enough money for bills and food in June 2005. So she went to Loan Max to put up her 1993 Ford Explorer in return for an $800 cash loan.

By September, she couldn’t pay her $1,463 debt and her car was repossessed and sold. She still owes another $413.

Janet Ruiz of Harrisonburg, Va., borrowed $2,950 from Loan Max in February 2005. She fell behind and owed more than $12,500 by the end of the year. By April 2006, she still had her car, but the debt hit $16,000.

Both women are suing the company, claiming it violated state and federal lending laws. The lawsuits threaten the business model of car title loan companies like Loan Max, which has two locations in Newport News and is unregulated because of a loophole in Virginia financial laws.

“We’re all very interested to see what the courts decide. That will probably set some kind of precedent,” said Joe Face, who heads the financial division of the State Corporation Commission.

(Read on …)

The opinion of a recent letter to the editor of The Providence Journal doesn't give the okay to military payday loans - but it does focus the bulk of the problem elsewhere. To paraphrase: 

While many critics believe the instant payday loan services should continue to serve the military community within certain guidelines, this seems to miss the real problem.

American soldiers and sailors use these companies because their pay doesn't make ends meet. Having served for 19 years in the Army Reserves (think of the money you're saving because they didn't let me finish my 20 years), I can speak with authority on the low wages for the people responsible for guarding our nation's freedom.

Some of our service people are fighting and dying for less than $20,000 a year. Meanwhile, their families have to find creative ways to save money, scrimp, and work extra, just to feed the kids. And when the money falls short, the predators lurk outside the gate, ready to take advantage of the situation. These payday loan operations are nothing more than war profiteers - and the U.S. military should solve this problem by paying its soldiers and sailors what they are worth.

To look at the current pay scale, you would think our government views our soldiers and sailors as worthless, and the technology they carry as far more valuable. Technology doesn't stand guard when the barbarians are at the gate; soldiers and sailors do. It is about time we paid them what they are worth. 

- Derek Tabor 

Until Mr. Tabor's points are considered and wages are raised, military payday loans will remain a necessity for many families.

It all began in New Hampshire. That's where Advance America opened its first store. As the payday loan company faces stock issues, its spokesperson talked to The Union Leader.

“We typically charge $20 per hundred,” said Jamie Fulmer.

Expressed as an annual percentage rate, therefore, Advance America’s interest is 521.43 percent. Certainly seems like a lot for an instant payday loan - but, Fulmer said, in New Hampshire, Advance America’s maximum term of the loan is 19 days. Subsequently, someone who borrows $100 and pays $120 back within 19 days is paying only 20 percent expressed as a simple percentage.

As Fulmer defended the practice of payday loans in the state and around the country, it's worth noting that personal loan companies are regulated by the state Banking Department.

“We also go out and examine them on an 18-month cycle just like we do with all our other licensees unless we have some reason to go more often,” Commissioner Peter C. Hildreth said.

Few payday loan complaints: The department has logged only four complaints against payday and loan title lenders in the last 12 months. New Hampshire has no usury law, and no cap on interest rates.

“The problem with title and [payday advance] lenders from the public point of view is that the APR turns out to be 300 percent, 500 percent. I saw one that was 2,000 percent,” the banking commissioner said. “The reason it’s so high is they are short-term loans, so if you extrapolate it from a two-week loan to a one-year loan, that’s why it’s a 300 percent APR or a 1,000 percent APR.”

However, he said, pay day loans can only be for short periods.

“If you take a loan for two weeks, you can’t just roll it over for another two weeks,” Hildreth said. Advance America spokesman Fulmer said, “Nationwide, our average duration is just under 16 days.“

Fulmer also explained how a no credit check payday loan can benefit individuals in need.

"These are hard-working, middle-America folks who don’t have ready access to credit but need additional cash,” he said.

He said Advance America’s $20 per hundred loan fee is a cost-competitive alternative to writing a bad check, when the fees that bank and vendors charge for bounced checks are taken into consideration.

(Read on …)

It's been an opportunity available to Americans for years, but online payday loans have just now made their way overseas. 

The UK’s first online payday loan is available from Payday Loans UK, making it easier and more convenient than ever before to receive a cash advance loan until your next payday. By applying for a payday loan online, you can actually receive cash the same day in some cases.

Unlike many other instant payday loan lenders, Payday Loans UK only requires that you're a UK resident at least 18 years of age and receive your pay by direct deposit. Moreover, unlike other cash advance lenders, a debit card is not required and credit checks are not used, making it even easier to be approved.

While Advance America may have reported strong growth last quarter, stock news tells a different story. 

Shares of the payday loan company plunged on Thursday afternoon, after the firm released the aforementioned second-quarter earnings report showing results saddled by regulatory changes and high costs.

To be exact, Advance America fell $4.54, or 25.3 percent, to $13.36. The company's shares had traded in a range of $11.58 and $18.33 in the past year.

Sure, revenue rose 4 percent to $155.9 million from $150.3 million - which is what the instant payday loan business emphasized. But analysts polled by Thomson Financial don't see as bright of a future.

The company admitted regulations in Illinois, Pennsylvania, Arkansas and Indiana are hurting earnings. Specifically, regulatory action in Pennsylvania and Arkansas reduced revenue by $9.6 million, and similar changes in Illinois and Indiana cut revenue by $4.3 million, Advance America said.

The changes included lower interest rate caps and limits on borrowing, which lower fast payday loan volumes.

"It forced Advance America and other companies to find another way to do business in those states," said Stephens Inc. analyst Dennis Telzrow.

The ads are on the radio, television, the Internet, even in the mail. They refer to payday loans, which offer fast cash, but at a very high price.

Check cashers, finance companies and others are making small, short-term loans that go by a variety of names. In most cases, however, the process is the same — a borrower writes a personal check payable to the lender for the amount he or she wishes to borrow plus a fee.

The company, in turn, gives the borrower the amount of the check minus the fee.

Fees charged for no faxing payday loans are usually a percentage of the face value of the check or a fee charged per amount borrowed — say, for every $50 or $100 loaned. If you extend or have to roll it over, say for another two weeks, you will pay the fees for each extension.

Under the Truth in Lending Act, the cost of payday loans (like other types of credit) must be disclosed. Among other information, you must receive, in writing, the finance charge and the annual percentage rate or APR (the cost of credit on a yearly basis).

A cash advance loan secured by a personal check, such as a payday loan, is very expensive credit. Let's say you are strapped and agree to write a personal check for $115 to borrow $100 for up to 14 days. The check casher issues the faxless payday loan you seek and agrees to hold the check until your next payday.

At that time, depending on the particular program or situation, the lender deposits the check, you redeem the check by paying the $115 in cash, or you roll over the check by paying a fee to extend the cash loan another two weeks. In this example, the cost of the initial loan is a $15 finance charge at a shocking 391 percent APR. If you roll-over the loan three times, the finance charge would climb to $60 to borrow $100.

There are other options. Consider them before choosing a payday loan:

• When you need credit, shop around and carefully. Compare offers.
• Look for the credit offer with the lowest APR - consider a small loan from your credit union or small personal loan company, an advance on pay from your employer, or a loan from family or friends.
• A cash advance on a credit card also may be a possibility, but it may have a higher interest rate than your other sources of funds. Find out the terms before you decide.
• Also, a local community-based organization may make small business loans to individuals. There is also credit counseling.
• Compare the APR and the finance charge — which includes loan fees, interest and other types of credit costs — of credit offers to get the lowest cost.

Some in Oregon believe payday loans are not a bad thing. They're entitled to their opinion, but Governor Ted Kulongoski does not share it.

On Thursday, he announced a new consumer campaign - including a 1-800 hotline and website - promoting instant payday loan alternatives and encouraging working Oregonians to avoid these high-interest cash advances.

"We've made real progress protecting hard-working Oregonians from high cost payday loans," said the governor. "But these new tools will help get this important message out - there are better alternatives for consumers than payday loans charging up to 500 percent interest."

In April, Kulongoski signed legislation establishing reasonable limits on payday loan lending charges to protect consumers from excessive price gouging. The law takes effect in July 2007.

These new tools are another step in the cash loan fight. They offer consumers good information and options to avoid spiraling debt. By calling 1-800-SAFENET or visiting www.211info.org, individuals can find information about cheap payday loan products offered by Oregon credit unions with significantly lower interest rates and fees.

Many credit unions began launching such resources two years ago, after Governor Kulongoski asked them to offer consumers a less-expensive option for short-term loans. With interest rates often more than 500 percent, payday loans create financial burdens and credit problems for consumers.

(Read on …)

Earlier this week, we reported that Missouri Senator Jim Talent was pushing for military payday loan reform. Now, over 70 consumer advocate and veteran groups are joining the fight, calling on Congress to enact the proposed cash advance amendment.

They argue that this predatory instant payday loan business doesn't just ravage service members and their families. It makes our military is less prepared.

Senator Talent amended the Defense Authorization (Senate Bill 2766) to cap interest rates on loans to service members at 36 percent - the same cap imposed by many states to thwart usury and payday loan sharks. A House-Senate conference committee must now approve the amendment for it to become law.

Consumer and veterans groups are urging committee members to do what is clearly the right thing and vote for the fast cash loan amendment to pass.

"We need your help in protecting military families from companies that target them with exorbitantly priced loans," the groups said in letters to Congress released today.

(Read on …)

The nation's biggest payday loan company, Advance America, reported the results of its operations for the second quarter and six months ending June 30, 2006, and the results were increased revenues across the board. The company boosted its earnings by 6.7 percent to $308.1 million, compared to $288.7 million for same period in 2005.

Total revenues for the quarter ending June 30, 2006 increased 3.7 percent to $155.9 million, compared to $150.3 million for the quarter ending June 30, 2005. For the quarter ending June 30, 2006, revenues for its payday loan centers opened prior to April 1, 2005 and still open today increased 4.6 percent compared to the same period in '05. 

When excluding locations in Arkansas, Illinois, Indiana, and Pennsylvania, where legislative and regulatory changes negatively affected the company's ability to issue no fax payday loans, and have hampered potential revenues accordingly, revenues for the quarter increased an impressive 17.4 percent.

"This was a challenging quarter, but one that also underscored the overall strength of our business model. We experienced new regulatory changes, which caused us to alter our business model in Pennsylvania and Arkansas and reduced revenues for the second quarter," President & CEO Ken Compton commented.

"In addition, the company continues to experience the effects of previous legislative and regulatory changes in Illinois and Indiana, which we believe improve the regulatory landscape, but have impaired our results for the second quarter. We remain encouraged by continued consumer demand for the payday cash advance product and strong growth rates in the other 32 states in which we operate."

In Illinois and Indiana, modifications to state-based legislation, which the company supported, resulted in a $4.3 million reduction in revenue for the quarter ending June 30, 2006 compared to that same period a year ago. The cash advance provider opened 46 and 88 new centers during the second quarter and six months ending June 30, 2006.

As of June 30, 2006, the firm had expanded its national operating network to a total of 2,670 faxless payday loan stores in 36 states.