Payday Loan Times

There was yelling, accusations of falsehoods, cheap shots and threats to call the police.

It wasn’t your typical meeting of the AARP in South Carolina.

The group’s town hall meeting Thursday to address payday lending featured plenty of passionate speeches from supporters and detractors of these small, high-interest cash loans.

However, no one at the meeting appears to have ever use such services.

While Georgia and North Carolina have outlawed payday advance providers, this state permits lenders to charge $15 for every $100 loan, with a $300 maximum. Lenders receive a check from the borrower for the loan and fee, but agree not to cash it for a month.

Critics say the charges are exorbitant and that borrowers will often go from lender to lender, taking out new regular or online cash loans to pay the old ones. One lender said she had a customer who received seven loans in one day.

“Once you’ve got the hook in you, you’ve got to rob Peter to pay Paul,” said Michael Cox, a lawyer and debt counselor.

Further payday loan critiques: Critics also allege payday loan lenders target the poor, blacks and military personnel, forcing them deeper and deeper into debt, claims the industry denies.

“I help my people,” said Sandra Howe, a West Columbia branch manager of Advance America, the nation’s largest payday lender, which is based in Spartanburg.

“What can you pay me? When?” Howe said. “I work with all of them. I’m proud of what I do.”

Willie Green, who spoke past a time limit set by the meeting organizers and provoked threats to call the police, said the solution is NOT to shut down the fast cash advance offices.

“They’re going to go somewhere else … they go to the Internet,” said Green, who owns 11 payday lenders and check-cashing stores in South Carolina, North Carolina and Kentucky.

The AARP stopped short of advocating for the banishment of payday loans, but the group proposed changes that would prohibit consumers from having more than one loan at a time, enforced by a centralized, real-time database that would monitor who receives payday loans.

(Read on …)

For a feature on the dangers of payday loans, The Dayton Daily News focused on Ora Houston of Trotwood.

She needed help paying her bills, but her bank turned her down for a loan. Therefore, the disabled 50-year-old turned to a cash advance lender she never expected: a credit union.

"I feel like the credit union rescued me," Houston said.

Through Wright-Patt Credit Union Inc., Houston enrolled in StretchPay, a program created in Dayton that expanded nationwide this summer.

StretchPay is similar to an instant cash loan provider, but comes with a lower annual percentage rate - 18 percent, compared with the 391 percent some payday lenders charge, according to the Federal Trade Commission. StretchPay was conceived after a 2000 forum on payday lenders sponsored by Dayton City Commissioner Dean Lovelace.

Jeff Carpenter, vice president of cooperative development for Wright-Patt, said he was touched by a young woman at the forum who was worried that, if cash advance payday loan lenders were shut down, "she'd have to go to a loan shark."

"It really sucks the money out of the poor and working-class community," said Stan Hirtle, a lawyer for Legal Aid of Western Ohio Inc. of these loans. "It gets a godly number in a debt trap they can't escape."

The Dayton area has about two dozen payday lenders, including five run by Advance America. That company runs 215 storefronts in Ohio, Jamie Fulmer, director of investor relations, said.

"Ohio is one of our larger states," Fulmer said. "There's a clear demand for the product. Our customers come from the heart of the middle class. They have jobs, high school diplomas; some have college degrees. They understand they have choices."

To borrow under StretchPay, you must be a member of a participating credit union; an account can be opened with a $5 deposit, Carpenter said. Sixty days after opening the account, members can apply for 30-day loans of $250 or $500.

The first time members borrow, they pay an annual fee of $35 for a $250 loan and $70 for a $500 loan. That fee - paid once per year no matter how often you borrow - is subtracted from the loan. A second payday loan will not be issued until the first one is paid.

An agreement reached in Congress would finally limit interest rates on cash loans to military service members.

The measure imposing a 36 percent cap on the annual interest rate for payday loans to service members or their spouses will be included in the defense authorization bill.

It has the backing of the Pentagon and consumer advocates that had believes such cash advance loans were dangerous to the armed forces.

As we've outlined across The Times, payday lenders offer short-term loans against borrowers' paychecks and charge fees. Borrowers that cannot repay the loan by the next payday often "roll over" the loan repeatedly, leading to more charges.

Industry officials say quick cash loans help soldiers in need and that military personnel will be forced to seek high-cost loans from unregulated Internet lenders. Meanwhile, Pentagon officials say spiraling debt has caused some service members to lose security clearances or become distracted from their missions.

A record number of people in Wisconsin are being lured in by the promise of fast and easy cash.

To what degree? These days payday advance lending is a $40 billions business. Some money managers, however, say such loans can give consumers a big headache.

Financial Adviser Lynn Knaack, for instance, says the lure of quick and easy cash is hard to ignore when bills are due.

"Your in that vicious circle where you live paycheck to paycheck so primarily they think that its okay they'll pay it off later," Knaack said.

Knaack works for Money Managers, a debt counseling service. She says many of her clients use cash advance loan providers and she sees that as a big problem, referring to them as a "legal loan shark."

Nevertheless, their popularity and number is growing, outpacing both Starbucks and McDonald's. There are more than 22,000 nationwide, with ads all over TV and radio.

Knaack says one of her clients learned that firsthand the trouble that can be associated with a regular or a faxless payday loan.

"She took out a loan for three-hundred, well in a month's time she'll owe 60 dollars on that," Knaack said.

And that's not even the highest rate.

Pete Peterson, meanwhile, is the president of US Bank in Eau Claire. He actually says some critics of fast cash advance companies are being unfair.

"They're there obviously for a reason, they're there because there is apparently a need for some people to use them, so I think that it's a viable business," Peterson said.

A viable business Knaack admits is not all bad. She says many cash advance lenders are willing to negotiate with her clients. But for those deep in debt, that's not always enough.

As a result, Knaack says the trick is to start small.

"You need to take it a step at a time and do what you can, even if it's just a little bit, don't give up," she said.

Advance America, the nation's largest provider of cash loan services, says it intends to vigorously defend itself against a lawsuit filed by the Pennsylvania Department of Banking alleging the company is providing lines of credit to borrowers without a license and with interest and fees in excess of state law.

"We created our Choice Line of Credit product expressly to comply with the laws of Pennsylvania," said Advance America Chief Executive Officer Kenneth E. Compton. "Many Pennsylvanians have chosen to use our line of credit since it was introduced in June, which we believe is evidence of the growing value consumers place on such forms of convenient, unsecured loans."

The issue of fairness, when it comes to online cash loans, is always a debated topic, of course.

"Across the country, millions of hard-working Americans can and do benefit from [bad credit payday loans] when faced with an unexpected bill or other immediate financial need," added Compton. "Our customers find these loans are typically a better option for them than bouncing checks, incurring late charges or damaging their credit rating by missing payments."

Compton also said the company is committed to helping consumers and regulators understand the role unsecured personal loans can play in helping individuals with their financial needs.

We'll see how this story ends. 

The Philadelphia Inquirer reports that Pennsylvania officials want mainstream lenders to do what they try to discourage check-cashing agencies and payday lenders from doing:

• Provide loans to high-risk borrowers.

While a handful of major banks have not signed on, credit unions have.

Former Banking Secretary A. William Schenck III began approaching banks last year, looking for "a fair and reasonable alternative" to cash loans, which can cost borrowers the equivalent of more than 400 percent in annual interest.

However, Schenck and state Treasurer Bob Casey Jr. have had a tough time persuading major banks to expand their menus. Therefore, Pennsylvania has turned to its credit unions.

An alternative to payday loans: The Pennsylvania Credit Union Association has responded with a new program - Better Choice - that will offer $500, three-month loans at an annual interest rate of 18 percent, plus an application fee of up to $25, and a savings deposit of $50. Despite the fees, it's cheaper than a no fax cash advance.

Better Choice borrowers can pay back a $500 loan with monthly payments of $197.50 - including interest and principal - and have the loan paid off, plus $50 and market-rate interest in savings at the end of the loan term, said Diane Powell, spokeswoman for the credit union association.

"The idea is to get them out of the lending trap," Powell said, "not just to fee them to death."

Powell said some large Philadelphia-area credit unions planned to participate in the Better Choice program. She said the association hoped the alternative to payday cash loans would be offered before the end of next month.

You probably see the ads everywhere: Receive a faxless payday loan today! No credit checks required and quick deposits every time!

Especially as many states are cracking down on brick and mortar cash advance businesses, the online world for these resources has been booming. Here's how it works:

The Process of Acquiring a Personal Loan Online: Various reputable cash loan lenders now operate online. To begin the process, simply submit an online application for review.

Answer all required question - and include pertinent information such as employment, income, bank account information, etc. Some online payday advance companies require you to fax in documents, among which may include a copy of your driver's license and pay stubs. They need proof of employment.

With a no fax payday loan, though, no faxing is required. However, the company will verify all information. Your application is simply approved and the company will direct deposit the funds into your bank account.

Requirements for Receiving a Payday Cash Advance: Although no faxing payday loans involve no credit checks, you must meet certain criteria.

For example, you must have a current job, verifiable checking account, and be at least 18. Furthermore, some no fax cash loan companies require a monthly income of at least $1000.

Before signing and agreeing to a personal loan, read the document carefully. Understand the interest rate, fees and due date. These facts should help you avoid defaulting on the payday loan.

According to The Providence Journal, state regulators this week denied an application from a national chain, Check 'n Go, to open a store in the Olneyville neighborhood.

The ruling, signed Tuesday by the state's director of business regulation, A. Michael Marques, followed an outcry from local businesses and community groups, which argued that the proposed cash advance payday loan outlet would be harmful to the financial welfare of Olneyville, one of the city's poorest neighborhoods.

Payday loan lenders, typically, differ from traditional check-cashing services, which charge a fee for cashing payroll, government or personal checks. In Rhode Island, however, both check-cashing services and payday lenders are licensed as check-cashers, regardless of whether they provide payday loans or not.

Check 'n Go, a subsidiary of the Ohio-based Eastern Specialty Finance, operates 1,320 offices in 35 states - including two in Rhode Island.

Past payday advance approval: In April, state business regulators approved licenses for two Check 'n Go offices - one at 1565 Post Rd., Warwick, and another at 1500 Diamond Hill Rd., Woonsocket.

But an application for a third location to provide instant cash loans - at 579 Atwells Ave. in Providence - prompted a response from local check-cashing businesses and community groups.

(Read on …)

Based on the interest rates they charge, most cash advance companies and stores earn a profit. While critics have a problem with this scenario, some of that money is often used for good. 

Case in point: PLS Auto Title Loans and the PLS Payday Loans Store in Montgomery have donated $400 to schools in the Montgomery area as part of a back-to-school promotion.

Customers at the two cash cash advance loan stores nominated two local schools to receive a $200 donation.

In drawings, George Washington Carver High School won one of the $200 contributions, while Holtville Middle School in Elmore County won the other.

Both stores are owned by Chicago-based PLS Payday Loan Store, which operates more than 200 financial service centers in nine states. Such moves by a bad credit payday loan company are probably just a PR decision - but that doesn't make the donation any less helpful.

Mere days after seemingly making the proper PR move and halting payday advances to the military, Advance America is facing a public relations nightmare.

The Pennsylvania Department of Banking has filed a Commonwealth Court suit against the cash loan company, saying it provided lines of credit without a license and exceeded state caps on interest and fees.

Advance America, of Spartanburg, S.C., is the country's biggest cash advance lender and operator. It has 100 branches in Pennsylvania. It offered a $500 line of credit in Pennsylvania that was ostensibly at 5.98 percent, but required a $149.95 monthly fee and a $20 minimum monthly payment, the Governor's Office said.

"Under this outrageous product, a person who borrows $500 and makes minimum monthly payments ends up paying back more than $4,000 over about two years," Gov. Ed Rendell said.

Advance America and other companies stopped making traditional, short-term fast cash loans this year because of new regulations from the Federal Deposit Insurance Corp.

"Advance America may not be making payday loans in Pennsylvania anymore, but they are still trying to take advantage of hard-working, hard-pressed families," Rendell said.

An Advance America representative could not be reached immediately for comment, but we'll keep you posted on this cash advance payday loan story as it develops.