This is unusual.

The Canadian government has stated that any crack down on payday loans is NOT near the top of its priority list. Meanwhile, companies themselves in that business are calling for changes.

Indeed, the Canadian Payday Loan Association renewed its plea yesterday for the federal government to introduce legislation this fall that would give provinces the authority to regulate the cash advance industry.

The CPLA, which represents 850 of the 1,350 stores offering payday loans across Canada, urged Justice Minister Vic Toews and other members of Parliament to make the bill a top priority now that six of 10 provinces have asked Ottawa for the ability to regulate typical and faxless payday loan providers.

"We just want to make sure that the legislation gets introduced quickly and passed through Parliament quickly because it is very important for consumers and for businesses," said CPLA president Michael Thompson.

Toews has said he plans to introduce legislation that would let the provinces set and police interest rates.

The Ottawa Sun reports that he is working with Industry Minister Maxime Bernier on such no fax cash loan legislation and plans to introduce it sooner rather than later, a spokesman said yesterday. The federal Criminal Code currently limits annual interest rates to 60%, but that limit has rarely been imposed on short-term loans.

However, not everyone supports the proposed reforms. The Consumers' Association of Canada says the changes will create a "hodgepodge" of regulations across the country, leaving consumers in a "worse position."

"We feel that consumers are adequately protected by that law (the Criminal Code) and we suggested that the federal government enforce it," said CAC president Bruce Cran.

It's certainly a different sort of battle in Canada over the issue of cash loans than it is in the U.S.

A local ABC affiliate in California recently ran a piece on the military payday loan debate that's swept up Congress. Here's a summation of it:

Thomas Day, a financial counselor at Travis Air Force Base referred to fees on cash loans as "loan sharking." He shared the story of senior airman, Joshua Hoyle, who got behind on his rent and car payment, choosing to see what a payday advance lender could to to help.

After all, in just two weeks, he could pay back the cash borrowed and be in the clear, right? But there's just one problem with that line of thinking, Hoyle said:

"If you don't have the money there to begin with, where is it going to come from?"

Nowhere. That's why most clients roll over their payday advance loans andd the interest rates throw them into further debt.

"Because of bad credit, they're either unable to get a security clearance or they're having the security clearance pulled," said Day of the consequences facing those with such financial difficulties.

Without security clearance, soldier can't be deployed to the battlefield, which is why Paul Leonard of the Center for Responsible Lending takes such issue with this practice: "We are at a time of war and payday lending is threatening the military readiness of our troops."

As the House debates the recently proposed interest rate cap on military bad credit payday loan lenders, Lindsey Mdsker of Community Financial Services Association had the following to say:

"At 36-percent rate cap, what that means is per $100 that our lenders lend, they can only charge $1.38. With $1.38, they can't afford to pay their own employees or any overhead costs."

So there are two sides to the debate.

Critics accuse the payday lenders of taking advantage of military personnel who are often young and financially inexperienced.

A map shows the number of quick cash loan lenders and check cashers clustered around Travis Air Force Base - more than the number of McDonald's and Burger Kings combined.

But Medsker raises a question to the critics: what's the alternative?

"The critics of this industry are very quick to criticize payday advances, but they're very slow to offer realistic alternatives for people."

The military says it does have an alternative, easy to qualify for interest-free loans. That's what Hoyle received after he turned down loans from payday lenders.

Such interest-free loans are available on most military bases from the Military Aid Society. Meanwhile, the proposed interest rate cap is now being debated in a House Senate conference committee and we'll keep you updated on the progress.

What to you do, in the weeks leading up to an election, when you're being blasted for supposesdly being against military payday advance reform? You change your stance!

So seems to be the case for Geoff Davis.

In a statement, Davis claimed credit for a compromise in the 2007 defense reauthorization bill that would impose a 36 percent limit on annual interest rates. Davis said his version of the cap would cover cash loans, as well as fees charged for insurance, investments and other financial products aimed at service members.

The original measure focused on just payday loans.

"As our troops are deployed, they are often faced with difficult financial decisions for themselves and their families," said Davis, who on Nov. 7 faces Democrat Ken Lucas in a race to represent Northern Kentucky. "Ensuring that lenders cannot prey on their financial vulnerability is extremely important to me."

Payday loan criticism: Last week, Lucas launched a campaign commercial accusing Davis of "helping predatory payday lenders charge our troops 300 to 400 percent interest."

Davis had opposed an amendment on faxless cash advance lending that included the 36 percent cap, approved by the Senate this summer. The Pentagon says payday lenders surround military posts and exploit troops.

News stories about his opposition - and $11,450 he took for this year's race from CNG Financial of Mason, Ohio, which owns a chain of payday loan stores - spread across political Web logs.

Fifteen of his constituents called or wrote to express concern, said Justin Brasell, Davis' chief of staff.

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The number of residents borrowing money from sub-prime lenders and cash advance providers increased last year, according to data released Monday by the Colorado attorney general's office.

In the state, sub-prime lenders, who handle consumer loans with an annual percentage rate (APR) of 12 percent or more, must be licensed by the state and report their lending activity every year. The rules don't cover lenders that make prime loans; banks and credit unions; creditors that make indirect loans, such as automobile dealers; and mortgage companies that make first mortgage residential acquisition and refinance loans.

Meanwhile, the number of licensed instant cash loan lenders - who make small loans of as much as $500 for 40 days or less, due on the consumer's next payday - rose almost 14 percent in 2005 from 2004, the AG's office said.

In 2005, such compnaies made almost $500 million in payday loans to almost 250,000 Colorado consumers, up 34 percent from 2004 and up 101 percent from 2002. The average cash advance payday loan amount was slightly over $300 and was to be repaid in 18 days with an average annual percentage rate of 345 percent.

Also, almost 15 percent of borrowers had 13 or more payday loans, meaning they were in debt for at least six months of the year.

In related news, almost 10,000 Colorado consumers borrowed from small-installment lenders, who loan $1,000 or less with terms of between 90 days and a year, in 2005. The average small-installment loan amount was slightly more than $300 and was to be repaid in six and a half months.

While seemingly not as dangerous as quick cash loans, these resources are still not ideal for those in need.

David B. Miller is a staff attorney with the Mississippi Center for Justice. He sat down with The Meridian Star last week and talked about the group's concerns over cash loan lendings.

The Meridian Star: Tell us about the Mississippi Center for Justice and your mission.

David B. Miller: It’s a non-profit law firm. Our main office is in Jackson. We also have a Coast office that does Hurricane Katrina work, and I’m in Hattiesburg with the Consumer Law Resource Center. We’ve got a staff of 12, with six attorneys. We have been open for about three years and do - generally speaking - civil legal advocacy on behalf of poorer, minority communities in the state.

The Star: What are the consumer law initiatives your firm is working on?

Miller: We are looking at bills particularly in two areas — payday lending and predatory mortgage lending.

A little background on bad credit payday loan lending. They have been regulated by the state since the 1990s. As of December of last year, there were 1,139 licensees in the state. There are an average of 12 per county. If you take thet 18 percent fee and annualize it, it comes out to about 470 percent annual interest. That’s a problem.

The other problem we see is that the location of these businesses tend to be in low-income communities; they tend to be close to military bases and on the Coast and on the river. They tend to be close to casinos, so they are praying on some pretty vulnerable people.

The Star: What do you want done about this problem?

Miller: You will hear some people argue that this is a necessary emergency service and we have to have it. If people actually use it as an emergency service, that might be a legitimate argument - which I still take issue with the amount of interest they charge - but certainly you can appreciate that people have a medical emergency and they have got to have somewhere to borrow money.

Again though, the problem we are seeing is that people aren’t using it as an emergency service; unfortunately we don’t have hard data on that because that kind of data isn’t collected under the statute. The only public data you can get now is through the Department of Banking and Consumer Finance, and there are two lines in their annual report that will give a snapshot as of December of the year of the report. For instance, it will say as of December, there were x number of licensees with x numbers of loans outstanding for x dollars.

They don’t tell you how much was loaned through the course of the year, they don’t tell you how many fees were collected and, more importantly, you can’t tell from that whether or not people are using cash advance loans as an emergency service. That is the kind of data we need.

The Star: What are their regulations? What do they have to do to become a business? How much interest they can charge?

Miller: They have to put up a bond for $10,000 and pay a cash advance license fee and have a storefront with a certain amount of space and pass a background check and that’s it.

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According to Advance America, military payday advances make up less than one perfect of the loans it doles out.

Nevertheless, the nation's most well-known payday loan company said Monday it will "voluntarily refrain" from making any cash loans to active, full-time members of the military, effective Oct. 15 except where prohibited by law.

The company said it is taking this step to "remove any perceived distraction to members of the military during this critical time for our country."

Congress held a hearing last week to consider a Defense Department request to cap rates charged on no fax payday loans to American officers in an effort to keep soldiers, sailors and airmen from incurring extensive debt. Some senators called payday lenders "predatory" for targeting military personnel.

It's an impressive, public relations friendly move for Advance America to take this step. It may show some critics that not all cash advance companies are evil.

Not so fast.

That pretty much sums up the stance of Vicki Woodward, the Senior Vice President of Community Financial Services Association of America (CFSA). She responded to the September 8 editorial in The Hattiesburg American ("Legislature Should Look at Payday Industry") with the following, paraphrased letter:

The [article] failed to mention one key fact - customers want and need access to short-term credit. Thousands of hard-working Mississippians use online cash loans responsibly, and are thankful to have somewhere to turn when they need quick access to credit.

Payday advance customer satisfaction levels are in excess of 80 percent and state regulators confirm that there are very few customer complaints. The reality is customers recognize bad credit payday loans can sometimes be their best option - given the alternatives of credit card interest and late fees, "courtesy" overdraft protection/bounced-check fees or small loans that put personal collateral at risk.

Critics of the payday cash advance industry claim to be representing the best interest of the consumer, yet they want to limit the already small number of short-term credit options available without providing realistic alternatives.

All consumers deserve strong protections and we will continue to encourage state policymakers to provide responsible regulation that protects consumers and their access to credit. We believe the people of Mississippi are best served when given a variety of options and trusted to make financial decisions based on what's best for them and their families.

In the end, this is one individal that believes a faxless payday loan should at least be one of those options.

It's been too easy for providers of payday loans in Mississippi.

That's the message a recent piece in The Meridian Star wishes to get across.

Ad jingles for these companies are catchy and their signs are flashy. For a “small” fee, you can receive cash today instead of waiting until your payday. It’s almost too easy. No credit check.

They hold your personal check until payday and you walk away with the cash you need. But truth is rarely found in their catchy slogans. Spending a year paying off a two-week, $400 quick cash loan because of nearly 500 percent in annual percentage rate interest is closer to reality, according to the Mississippi Center for Justice.

The worst part: It’s the poor who rely on these types of businesses. And they’re the least likely to have the financial resources to withstand the deep levels of indebtedness caused by the harsh terms.

The Department of Defense lists payday cash loans as one of the top 10 threats to service members and their families, the Center for Justice said. Per capita, Mississippi ranks third in the nation in the number of payday lenders.

Other southern states have started regulating cash advance lenders; some have even done away with them altogether. The 1,139 payday businesses in Mississippi, however, continue to operate with little scrutiny.

When businesses take advantage of our most vulnerable citizens, we believe it is time for the state to investigate their practices. While over-regulating business is rarely a good thing, it is important that these businesses be required to report the number of payday loans online they make each year and their true annual percentage rates.

Are the same people using these businesses over and over again? If so, is this really a necessary emergency option for consumers? What are the alternatives and solutions?

It is time the state takes an active approach to investigate payday loan businesses.

Don McNay of The Richmond Register is not pleased.

He wrote a recent column talking about the current fight in Congress over military payday loans. The main target of McNay's wrath? Geoff Davis. Let's read what he has to say, paraphrased …

As John Cheves noted in a recent Lexington Herald-Leader story, there is legislation in front of Congress to limit payday advance lenders to 36 percent interest when they lend money to soldiers. Davis is trying to stop it.

These cash loan providers are big contributors to Congressman Davis’ campaign.

Cash advance lenders say they can’t make money charging 36 percent. Can you think of another business that would whine about a 36 percent limit? When I grew up in the Northern Kentucky area that Davis represents in Congress, some cities were controlled by the Mafia. The mob had a term for 36 percent interest rates: loan sharking.

If a loan shark had charged 390 percent to 780 percent, not only would he have wound up in the river, someone would have thrown all their friends and relatives in, too. Now lenders like Check’n Go are “legitimate” corporations, and their employees can donate huge amounts of money to politicians. So far, they have coughed up $11,450 for Davis.

Davis, corporations taking advantage of soldiers and cash advance loans are a perfect storm of things that plague America. I’m angry about people continuing to rip off soldiers and military people.

(more…)

"He who increases his wealth by excessive interest gathers it for one who has pity on the poor."
– Proverbs 28:8

So begins a recent article from Richmond.com. It states that predatory lending is not new. During biblical times, abusive lending practices were addressed by instituting strict standards, including banning the charge of interest to the poor (Exodus 22:25). Likewise, in the story of Zaccheaus (Luke 19:8-9), Jesus commended him for promising to repay the excessive fees he had exacted from the oppressed.

Today, no fax cash loan practices exploit low- to moderate-income people by charging as much as upward of 780 percent on a one-week payday loan. This is both a legal issue and a moral issue. Therefore, all persons of faith are called to express their values in conversations about the predatory lending problem in Virginia.

Anita Monti, a payday loan borrower, tells this story:

"I felt like I was in a stranglehold each payday. After a while I thought, 'I'm never going to get off this merry-go-round.' During this time, I got a promotion and a raise, but I never saw any of that money. It all went to pay the fees on my loan."

She has to turn to her church for assistance.

The Bureau of Financial Institutions reports that in 2005, more than 3.3 million regular and online cash loans were made to more than 445,000 borrowers from 756 payday loan locations in Virginia. In that year, the dollar amount extended to payday borrowers crested well above the $1 billion mark in Virginia.

All of these figures are up exponentially since the Virginia General Assembly passed a bill authorizing payday advance lending in 2002. This legislation prohibits payday lenders from renewing, refinancing, or extending a payday loan. It also prohibits lenders from making more than one loan at a time to a borrower.

But it hasn't accomplished much. Consumers can still go to various borrowers for multiple fast payday loans - and they've been doing just that.

Therefore, Delegate John O'Bannon has proposed repealing the Payday Loan Act of 2002. This would halt payday lenders' ability to charge exorbitant interest rates and bring them under the current Virginia statute that limits small loan APRs to 36 percent. The bill (HB 619) was carried over last session but is expected to return in 2007.

Contrary to what the cash advance industry claims, this legislation will have no effect on payday lenders that seek to provide an occasional short-term solution to a borrower's debt crisis. It will only affect those payday lenders that seek to trap desperate borrowers into multiple loans. It's a start.

Continuing to ignore the growing problems fostered by payday loans is a disservice to members of our communities who are victims of the industry and can't see the light at the end of the debt tunnel. Compassion is a central value of American faith communities; we must leverage this compassion to encourage the same in our legislature.