State Sen. Martha Scott may be the matriarch of politics in her Detroit district, but one of the region's rising political stars is threatening to oust her from the Legislature in the August 8 Democratic primary.

Tough words are being exchanged between Scott, 70, and state Rep. Bill McConico, 33, over Scott's effectiveness and McConico's inexperience in the race for the 2nd Senate District, which covers Highland Park, Hamtramck, northeast Detroit, Harper Woods and the Grosse Pointes.

Challenger McConico might be less than half the incumbent's age, but the state representative is emphasizing his achievements, pointing to laws he sponsored, one of which regulated the payday loan industry. He also has repealed the state's mandatory-minimum drug sentencing laws, and created the so-called Blight Court in Detroit that deals with violations like illegal dumping and abandoned real estate.

The new law mandating the state's payday loan business took effect June 1, and as a result, all lenders are required to charge less than they used to when payday loans are issued. With the passage of the law, a payday loan company now cannot charge more than $76 on a $600 cash advance. No loan can be for more than $600, and a consumer is limited to having only two cash loans outstanding at once.

It will be interesting to see how this race shapes up as the primary approaches, and what role, if any, the new laws play in deciding its outcome. The quick payday loan business has become increasingly popular in the state, and Michigan's consumers need to elect the representatives most likely to protect their rights.

David Seely, president of Kirtland Federal Credit Union, which makes small, short-term, personal loans to its members at a federally mandated interest rate cap of 18 percent or less, doesn't want to hear it.

That is, he can't believe when payday loan and car-title loan companies complain about being squeezed out of business when and if New Mexico caps interest rates at 36 or 54 or 60 percent.

"We do very well at that rate," Seely told the Albuquerque Tribune, which is running a series of stories about the payday loan industry.

Seely said payday loan regulations proposed by New Mexico are a good first step in regulating predatory lending, but he regrets the regulations don't include an interest cap.

"It could be 36 percent or 48 percent. It needs to be something less than nothing at all. If we can live at 18 percent, why can't they live at some multiple of that?" he said.

John Rabenold, V.P. of Government Affairs with Check 'n Go, has an idea. He said credit unions can get by on 18 percent interest because they are non-profit companies that don't pay taxes. When the rare credit union, such as Kirtland Federal, offers small, short-term loans, it's only a small part of their overall business, he says.

"Small loans is something they can do and not miss, but small loans are 100 percent of our business. In our business, a 90 percent or even a 100 percent (annual interest rate) cap means you can't pay for bringing the product to market," Rabenold said.

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Attorney Susan Berkowitz is a consumer advocate in South Carolina. She's witnessed the perils of payday advance lending for years now. While the future of payday loans in the state has been questioned recently, there doesn't appear to be an end in sight.

It's a dangerous business. What starts as one loan to cover an unexpected expense, or even groceries, often becomes two loans - the second payday loan used to pay off the first. Then it's a third loan, then a fourth and the cycle continues… Berkowitz said she met one client who was juggling 19 loans at the same time.

"The payday loan industry has learned to develop lending practices that take advantage of those who can least afford it," said Berkowitz, director of the South Carolina Appleseed Legal Justice Center, a Columbia-based advocacy group that provides legal services for the poor.

One of the problems is the stature of the payday loan companies in the state. These aren't tiny, mom-and-pop organizations; the nation's largest cash advance business is based in South Carolina, Advance America. It may be banned from offering payday loans in neighboring states, but in its home state, business is booming.

Payday loan controversy: Could corruption be stalling legislative action on payday cash advances? Two years ago, Gov. Mark Sanford hitched a ride to Seattle for a National Governors Association meeting on Advance America's private jet. Campaign spokesman Jason Miller said the governor was simply saving tax dollars by accepted the rise, which was legal under state ethics laws, because it avoided the use of state transportation.

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What demographic do providers of payday loans NOT focus on?!? Naturally, these lenders try to make money off anyone they can - military men, African-Americans, anyone in need of a cash advance.

As the following question and answer section from The Daily World depicts, no faxing payday loan companies also prey on elderly clients …

Q. Our older neighbor mentioned that she goes to one of those pay day loan places every month a week before her Social Security check arrives. Seems to us that she’s wasting a lot of money and is kind of trapped. Are there organizations that can help her so she doesn’t waste so much money this way?

A. The use of no fax payday loans has increased to epidemic levels. People are pulled into these cash advances by the appeal of quick money and what seems like a small fee. But the fees can actually result in some very high interest rates.

Seniors on low, fixed incomes tend to use these payday loans as a means of paying for prescriptions or meeting monthly living expenses. If you know someone who has gotten into payday loan trouble, take immediate action.

If possible, family members should help pay off the cash loan. If that’s not possible, a financial adviser can assist in establishing a budget that will continually lessen the need for such personal loans until there is no longer a need for them at all.

With payday loan restrictions being shot down in Illinois, the cash advance industry continues to make money in the state.

Illinois Attorney General Lisa Madigan and Thomas James, senior assistant attorney general in the office's consumer fraud bureau, spoke to community leaders gathered at the Peoria County Courthouse. Their main concern? Overall predatory lending.

"When people come to you seeking advice on financing a car or a mortgage, you can give them advice so they don't end up defrauded and getting into loans they can't afford," she said.

Minorities and women especially are targeted by these faxless payday loan lenders. One document distributed by Madigan defines predatory lending as "making a loan that the borrower does not need, does not want or cannot afford. The primary benefit of the loan always goes to the lender, not the borrower."

Practices included within this predatory field include:

- Auto financing by dealers that charge interest rates much higher than a person would get from a bank or credit union.

- Payday loans - such as no fax needed payday loans - with extremely high interest rates.

- Mortgage practices including use of high fees and deceptive paperwork to disguise the true amount of the loan, as well as interest-only loans, balloon payments, some adjustable rate mortgages, prepayment penalties, and the newest scheme, option payments.

We'll keep you apprised of devolpment regarding these mortgages and other cash loan changes in the state.

Are payday loans good or bad for consumers? That's a question often debated, but certain facts can't be questioned regarding these resources. 

For example, online payday loan lenders often target African Americans and U.S. military personnel. A recent analysis by the University of Washington and the Seattle Post-Intelligencer found that twice as many payday loan lenders are located in African American communities in Washington, regardless of the income levels of people in those neighborhoods.

Furthermore, numerous government reports have also found a high concentration of military payday loan lending stores close to armed forces bases. The problem arises when these borrowers can’t repay the loan when it comes due, so instead they get another loan to pay off the first. For borrowers with multiple loans, payday lending functions as chronic debt instead of helpful credit.

The Center for Responsible Lending estimates that payday adance lending costs five million Americans $3.4 billion annually. In 2004, this industry made over $164 million from fees charged to consumers in Washington alone.

Despite pressures - and these facts - payday loan bills have been shot down in the state. Corruption is an issue. The industry gave close to $200,000 to state PACs and candidates in 2004, while two former state regulators are now lobbyists on behalf of the business.

Consumer advocacy groups, including the Statewide Poverty Action Network, will be working to counter that influence in the 2007 legislative session. They have their work cut out for them, as protections hoping to be passed include minimum repayment periods on pay day loans, a cap on APR and the prohibition of mandatory arbitration to allow consumers recourse in a dispute.

Do New Mexico payday loans help or hurt those in need? That was a question The Albuquerque Tribune previously raised - in yet another artice on the issue, recent legislation and cash advance controversy is delved into deeper.

The piece starts by discussing the multitide of car title and/or payday loan stores in the radius of a few blocks; seven establishments exist there, to be exact. Some even have a drive-through window!

A group protests the practices of a local payday loan company. One man even brought an inflatable shark to represent preadtory lending. Naturally.

Overall, New Mexico is home to over 700 payday loan and car-title stores. This is a fairly poor state and, therefore, fertile ground, for an industry that's scarcely controlled by law - even though some of the state's most prominent political figures are passionate about reining it in. So why haven't they done so? Attorney General Patricia Madrid sheds light on the issue.

Voices for ayday loan reform: Madrid has vivid memories of the 1999 legislative session, her first as attorney general, when she spoke to lawmakers in fervent support of a Senate bill that would have capped interest rates on cash loans at 45 percent.

"I gave a good, spirited speech," she said during an interview at her Albuquerque office. "I was quoting the Bible, the Talmud, the Koran. It was great."

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The Department of Defense has listed payday lending in its Top Ten issues of concern for military families. What was once a relatively minor issue for service members living in Okinawa, Japan, has become a greater threat with the rapid increase of online payday loan companies using the Internet.

"The growing problem here on Okinawa is, although there is only one payday lender on island, many people are consulting the internet to get payday loans," said Allison Green, Director of Navy Marine Corps Relief Society, Okinawa.

Military officials believe that payday lending falls under the auspices of predatory lending, which involves lenders taking advantage of the borrowers they believe are vulnerable, looking for fast and easy money.

Active armed service personnel are three times more likely than civilians to take out a payday loan, according to the Center for Responsible Lending, an organization opposing predatory lending.

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Pawn shops? Those are SO a few years ago.

That was essentially the line of thinking for Ezcorp, a business that stuck solely to this industry until a recent expansion into the world of fast payday loans.

Over the last fiscal year, the company has opened more than 100 payday loan stores, referred to across the nation as Ezmoney stores. Another 115 are planned for this fiscal year, which ends in September. The plan is to run 350 payday advance loan locations by 2007.

A profitable payday loan world: While the pawn business remains the company's largest revenue generator, Ezcorp's payday loan and credit service revenue nearly doubled in the first quarter of 2006.

These figures ought to receive a further boost as new bad credit payday loan stores mature, says analyst Richard Eckert of Roth Capital Partners. It takes 18 months for new stores to get their loan balances up to $80,000, the point at which they become profitable.

"You have a large number of stores that are just coming into their own as we head into fiscal 2007 and beyond," Eckert said. "For fiscal 2007, they don't have to add a single store to exhibit above average (earnings) growth."

Most of Ezcorp's stores are in Texas, though the percentage of stores that are in the Lone Star State is dropping as the firm expands into states such as Colorado, Utah and Wisconsin. The idea is to offer payday advances in as many areas as possible as time goes on.

It all started because Johnny Walker didn't want to be late on rent.

"I should have just paid the late fees on the rent. That would have cost me only $25 plus $5 a day," he said.

Instead, the Santa Fe, N.M., resident was out $1,300 poorer and lost his family's Chevy Lumina by the time the ordeal was over, the Albuquerque Tribune reports.

The 48-year old became one of the tens of thousands of people in New Mexico who turn to car-title or payday loan companies each year for fast cash with few questions asked. As a poor state, New Mexico is prime territory for the industry. Yet there is not one law or regulation governing payday loan and car title firms in the state, which have gone from few dozen 15 years ago to about 700 now.

The companies appeal to people anxious to get money for rent, car repairs, medical emergencies or other desperate situations because their no credit check payday loan applications involve little hassle. After all, people who have good credit don't need their services in the first place. New Mexico is just one of 11 states with no APR limits.

As a result, payday and car-title companies charge people like Walker (above) an average APR of 322 percent.

Efforts to pass laws controlling the industry have been stymied as the state's lawmakers remain split along free-market and consumer protection lines. Strong lobbying on the industry's behalf has also helped the Land of Enchantment remain that way for payday loans.
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