Words of Wisdom Regarding Florida Payday Loans
By J.J. CameronPayday Loan Writer
Kris Fulcher - featured in a recent article in The Pensacola New Journal - understands the dangers involved in payday loans. However, the Navy Hospital medical assistant, isn't worried about her finances because she's not a frequent cash loan borrower.
"You have to be careful," Fulcher said after she walked out of a cash advance center on Navy Boulevard with a $100 loan that will cost her $15 in two weeks."I've heard about a lot people who fell into a trap."
Haven't we all? More than 37,000 Floridians took out 20 or more no fax payday loans each in 12 months, according to a 2004 report to the Legislature. Despite legislation changes that imposed more consumer protection regulations on Florida payday loan lenders a few years ago, advocates said the main issue still has not been solved: lending that targets low-income workers, military personnel and others who have little or no savings and live paycheck to paycheck.
"It's predatory lending of the worse kind and they are proliferating across Florida," said Mark Ferrulo, director of the Florida Public Interest Research Group. He's among many Sunshine State consumer group reps concerned about payday loans in the state.
The spread of payday loans: Payday loan centers weren't always so widespread in Pensacola. In fact, none were listed in the phone book until the end of 1999. The influx began soon after legislators put a 30 percent cap on the annual interest rate allowed by car title companies.
Previously, title loan companies could charge nearly 300 percent annual interest on loans made in exchange for car titles. At that time, title loan centers numbered nearly 40 in the Pensacola Bay Area, according to the 1999 telephone directory. Most title loan companies either relocated across the state line to Alabama or converted to payday loan centers.
"I don't see how one is much different than the other," Ferrulo said. "When people are so desperate for money that they are willing to pay such high interest rates for a loan, chances are they will still be in the same situation in two weeks. It's a trap."
A Florida law is meant to help these individuals. It prohibits the extension of payday loans. If a borrower defaults at the end of the two-week original payday loan term, the lender must give the borrower a 60-day penalty-free grace period to repay the loan. It's a start.
Jamie Fulmer, spokesman for Advance America - which owns about a third of the payday loan centers in the Pensacola Bay Area - said payday loans are not intended to trap borrowers.
"There are millions of Americans who get caught between paychecks with unexpected expenses," Fulmer said. "They understand what their options are, and our service is cost-competitive if you consider what a bounced check fee or a credit card late fee can cost."
Other debts are different. Credit card late fees vary, but range $10 to $35, plus a possible higher interest rate on a defaulted credit card account. Most of the time it's a one-time fee and, unlike payday loans, are not based on the amount owed. A borrower who takes out a $500 payday loan in Florida will have to repay about $555, a 10 percent two-week rate on the original loan.
One thing is for certain: the online payday loan business is booming. Advance America revenues from "fees and interest charged to customers," rose from about $360 million in 2003 to more than a half a billion dollars in 2005, according to U.S. Securities and Exchange Commission files. From 2003 to the end of 2005, Advance America added at least 50 new centers in Florida, for a total of 211 locations.
There are more than 1,000 payday advance lenders in the state. Some of the regulations established over the years include a prohibition to rollover a payday loan, a database that links centers and is monitored by the state, and a requirement to send borrowers to a credit counselor if they are unable to repay the debt on time.
Pensacola-based Consumer Credit Counseling Services is on the list of counselors that payday lenders refer their clients to. About 10 people each month seek counseling at the non-profit organization, Terry Daniell, assistance vice president of Consumer Credit Counseling, said.
"Someone who can't pay back a payday loan needs to let the lender know within seven days after receiving the loan," Daniell said. "Then they will be referred to a counseling agency and will be given a 60-day grace period to go through a budget and figure a monthly payment."
The regulations protect the consumer to an extent but don't address the main issue of "abusive" interest rates, said Ferrulo of Florida Public Interest Research Group. The only way to change that, at the state level, is when local governments start to regulate the local centers, said Christopher Peterson, co-author of a study that ranked Duval County, in Jacksonville, number one in density of low cost payday loan lending centers in the state.
