We recently discussed ways in which some in Mississippi are trying to divert consumers from the use of cash advances.

Now, Oregon Governor Ted Kulongoski is proposing new ways to protect those in his state from such high-cost regular and no faxing payday loans.

Even after he signed a payday loan protection law in April, the governor joined the Oregon Department of Consumer and Business Services to announce the additional steps they recommend to citizens. The consumer department regulates instant cash loans and other lenders and is considering rule changes to tighten down on the definition of a lender.

The governor also wants legislation extending the interest rate cap on payday advance lending to apply to title lenders whose short-term loans are secured by the title of the borrower's car. In Oregon, the number of payday loan stores nearly doubled in the past five years, with interest rates that often exceed 500%.

The governor says such interest rates hurt the working poor the most. He'd like to see more steps taken to protect these people from occasionally dangerous payday advance loans.

Congressional negotiators have chosen to protect military paychecks instead of argue over jurisdiction: they've agreed to include a 36 percent cap on cash loan interest rates and fees in the 2007 defense authorization bill.

The limit, which would apply to money borrowed by active-duty service members and their spouses, is aimed at supposedly cheap payday loan operations that provide high-interest, short-term paycheck advances, according to sources involved in working on the compromise bill.

Lawmakers are continuing to try to work out a few final differences, but Republican congressional leaders hoping to get a final bill to the White House by late next week. In testimony last week, David S.C. Chu, undersecretary of defense for personnel, called on Congress to approve the 36 percent interest limit.

He said past attempts to protect military members have proven ineffective due to differences in how states regulate loans and because some lenders were avoiding state laws by only lending money to nonresidents of the state where the money was given; or by using the Internet.

The cash advance industry has fought hard against the cap, arguing that charging high rates for unsecured loans is not unreasonable and stating that the industry has not - as the Defense Department claims - targeted military members for loans.

The Senate included the interest cap in its version of the defense bill passed earlier this year, but getting the House to adopt the provision has proven difficult because two committees - veterans’ affairs and financial services - claimed jurisdiction over payday cash advance issues. Negotiators got around those objections by putting the interest cap in Title 10 of the U.S. Code, a section covering military benefits, rather than in banking or veterans’ law.

In this week's Hattiesburg American, Tawnya Crockett talks about alternatives to payday loans. Let's look at them: 

• When you need credit, shop carefully. Compare offers. Look for the credit offer with the lowest annual percentage rate - consider a small loan from your credit union, a loan company or family or friends. These have lower interest rates than cash loans.

• 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.

• Ask your creditors for more time to pay your bills. Find out what they will charge for that service - as a late charge, an additional finance charge or a higher interest rate. IF you must take this action with a faxless payday loan, be aware of rollover costs.

• Make a realistic budget, and figure your monthly and daily expenditures.

• Avoid unnecessary purchases - even small daily items. Their costs add up. Also, build some savings - even small deposits help - to avoid borrowing for emergencies, unexpected expenses or other items. For example, by putting the amount of the fee that would be paid on a typical $300 cash advance in a savings account for six months, you'd have extra dollars available.

• Find out if you have or can get overdraft protection on your checking account. If you're regularly using most or all of the funds in your account and if you make a mistake in your checking or savings account ledger or records, overdraft protection can help protect you from further credit problems. Find out the terms of overdraft protection.

• If you decide you must use a cash advance loan, borrow only as much as you can afford to pay with your next paycheck and still have enough to make it to the next payday.

Republican state Senate candidate Don Stout called it "ridiculous and hypocritical" for state Sen. Lowell Barron to lead a reform effort against payday loan operations … when Barron himself owned more than 20 outlets until recently.

Barron, D-Fyffe, responded that Stout should stop the personal attacks and focus more on his own plans if elected, according to The Huntsville Times.

Stout leveled his charges Wednesday in a news conference at the Madison County Republican headquarters. The Senate district encompasses Jackson and DeKalb counties and eastern portions of Madison County.

He said Barron should "come clean" by proving that he's completely out of the quick payday advance business. Stout challenged Barron to reimburse borrowers the high interest he charged while in the business.

"Since he's had a Damascus road experience, apparently, I think he ought to return the money he's taken from them over the years," said Stout.

Barron, meanwhile, issued a statement restating his reform plan and asking Stout to back off.

"My opponent's entire campaign has been negative personal attacks on me with no plan for what he would do as senator," Barron said. "My plan to reform the payday loan industry is public, and I am proud that it has been endorsed by newspapers as well as leading consumer advocacy groups in the state."

Payday loan back story: The news conference followed Barron's announcement last week that he had sold his interest in faxless payday loan businesses and now plans to reform the industry.

Barron is drafting bills that would outlaw so-called rollover loans that can quickly rack up hefty interest charges, ban payday advance providers from operating within five miles of a military base, forbid lenders from garnishing any military wages, and prohibit the seizure of personal property on bad loans made by quick-cash outlets.

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Having seen what other Wisconsin cities, such as Racine, have done about payday loans, the city of Wausatoas has placed a one-year moratorium on the businesses. During that time, it will consider measures that restrict cash advance stores to particular areas in the community.

Tuesday's vote by the Common Council blocks EZ Corp., based in Austin, Texas, from opening an EZ Money Payday Loan Store at 6502 W. North Ave. in the East Town Business District.

EZ Corp.'s local attorney, Harvey Goldstein, who had threatened litigation if the moratorium passed, declined to comment Wednesday. But a spokeswoman for the state agency that regulates fast cash loan companies applauded Wauwatosa and other communities that have such restrictions.

"It's exciting to see these communities take this into their own hands," said Carrie Templeton, of the state Department of Financial Institutions. "We need some momentum to get the Legislature to enact reasonable protections for consumers."

According to Templeton, companies typically charge $20 for each $100 borrowed - and the fees mount as customers who are unable to make that payment extend the bad credit payday loan.

"The effective interest rate can be well over 500 percent," she said.

Wauwatosa's moratorium is in response to neighbors' complaints that the W. North Ave. store would attract crime and lower property values. The measure prohibits for up to one year check cashing, payday loan and similar businesses from locating within 300 feet of residentially zoned parcels and within 1,500 feet of a similar business.

During this period, officials will decide whether they ought to restrict such businesses permanently and to amend its trade district zoning ordinance to keep them out of its boutique business areas, such as East Town and the Historic Village.

A public hearing on the trade district ordinance has been set for 7:30 p.m. Oct. 17 at City Hall.

The current language restricts "check cashing businesses" in those business districts; therefore, Goldstein has argued that that term does not cover EZ Money stores and their payday cash advances.
"The council's intent was clearly that they didn't want any of these kinds of businesses," Community Development Director Nancy Welch said. "But check cashing stores was the operative expression at the time."

Wauwatosa is among a handful of Wisconsin communities that have imposed restrictions in recent months on an industry that's grown exponentially over the last decade. According to Templeton, there were 64 short-term loan businesses in Wisconsin in 1996. Today there are 470, 30 of which opened in the last nine months.

As debate over military payday loan use has raged on in Congress, the House did sign off on legislation to protect U.S. military personnel from abusive sales of overpriced life insurance and investments - but the cash advance issue remained unresolved.

The House of Representatives voted 418-3 to approve a measure that had already been passed by the Senate. Work on the legislation began two years ago after the media reported that aggressive sales agents were marketing high-fee financial products to unsophisticated young recruits about to ship out to Iraq.

This, of course, isn't the main payday advance issue. That one revolves around high rates of interest.

Louisiana Republican Rep. Richard Baker, noting the risks that military men and women take every day, said that "risking their financial future should not be among them."

However, The Pentagon has been urging Congress to cap interest rates lenders charge on these cash loans to American troops, as part of a still-pending defense spending bill. That wasn't part of this bill.

The measure sent to President Bush on Thursday would ban sales to the military of contractual plans, a mutual fund investment product that has virtually disappeared from the civilian marketplace because of exorbitant fees baked into the payments. The measure also would require military personnel be told about life insurance that is available to them through the federal government.

In the past, some troops have been sold life insurance policies offering the same coverage as the government plan, but costing far more. The legislation would also establish a list of barred brokers and sales agents to be made available to military installation commanders.

Does this mean the issue of bad credit payday loans to the armed forces is off the table for good? We'll keep you posted.

A recent opinion piece in The Orlando Sentinel certainly didn't hide from how it felt about the issue of payday cash loans to the armed forces. Here it is, paraphrased: 

It's unconscionable that Americans who volunteer to put their lives on the line for their country in the military have been targeted by rapacious cash loan lenders charging annual interest rates of 400 percent or more.

Congress needs to outlaw this predatory practice.

In June, the Senate unanimously approved a measure co-sponsored by Florida Democrat Bill Nelson and Missouri Republican Jim Talent to cap annual interest rates at 36 percent for payday loans to service members. The measure needs House approval to become law.

Ideally, that would come this week as Congress considers a military-spending plan.

All Americans deserve protection from cash advance loan sharks. Protecting men and women in uniform is a great place to start.

Considering the allegations surrounding Congressman Geoff Davis - such as the claim that his objected to the proposed military payday loan amendement is corrupt - it's a good thing he's chosen to speak up.

Davis, an Army veteran and freshman congressman from Hebron, has been criticized by consumer rights groups for opposing a 36 percent cap on payday loans.

But he called the idea "knee-jerk legislation" to The Cincinnati Post, saying the 36 percent cap would drive payday advance lenders out of business and send customers into the arms of other predatory lenders whose loan amounts aren't limited to the typical $500 and $700 maximum of cash advance providers.

Installment loan lenders, for example, can deliver personal loans for as much as $5,000 to individuals who typically end up rolling over the loan, generating more interest, because they can't afford to pay it back.

A real payday loan alternative: Davis spokesman Justin Brasell said the congressman's proposal would allow payday cash loan lenders to charge the fee they are charging up front now - about $30 per $200 on a two-week loan, which rolled over through a year would calculate to an annual interest rate of 390 percent - but would prohibit companies from rolling over the loans if the customer can't pay.

In such cases, Davis' measure would require lenders to set up customers on a six-month payment plan with an interest rate capped at 20 percent annually, Brasell said.

Consumer rights advocates say they don't dispute there are flaws within the installment loan industry, but that isn't a reason not to rein in payday advance loan businesses while they can.

"There are problems in the small installment loan market as well," said Jean Ann Fox, spokeswoman for the Consumer Federation of America, a group that has been pushing the amendment Davis opposes."A 36 percent rate cap as the outside limit, that may be high but that certainly is a vast improvement over 390 percent payday loans."

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People can change. Or people can wish to be re-elected as a senator from Alabama. Either way, a recent editorial in The Birmingham News suggests that others should get behind Lowell Barron (pictured).

As we reported on earlier, the senator in question used to own a series of cash loan stores. This year, however, Barron sold his payday lending businesses to a business partner. And now the Fyffe Democrat is proposing legislation to put more restrictions on payday loans.

"I've been in the banking and finance business for 25 years," Barron told The Associated Press, "and I realize there are people with limited credit who have few places to turn, but there is no reason why anyone should exploit people with a short-term cash program."

In the 1990s, online payday advance lending businesses spread like wildfire.

In 2003, the Legislature passed a law that set a maximum fee of 17.5 percent per transaction (still an annual percentage rate of 455 percent) and limited customers to only one rollover. The main thing the law did, however, was to make the practice legal, after state banking officials, attorneys general and courts were poised to outlaw payday loans because they exceeded the 36 percent maximum interest rate allowed under the state's Small Loan Act.

Barron says his new bill would:

• Completely do away with rollovers
• Establish a statewide database to prevent lenders from providing instant cash loans to anyone who has had such a loan in the past 60 days
• Prevent cash advance lenders from taking a person's property
• Ban payday and title loan businesses within five miles of a military base and prevent them from garnisheeing the pay of service members or from collecting from a service member who is deployed overseas for combat

It's all a welcome change from Barron, who as Senate president pro tem presided over the Senate when it passed the bad credit payday loan lender-friendly bill in 2003 over a compromised bill worked out with consumer advocates.

We can't say whether Barron's change of heart is due to a genuine, newfound compassion for struggling families or a political maneuver designed to help him hang on to his Senate seat. But protecting families from predatory lending is commendable.

His colleagues in the Legislature should follow his lead.

This week's acquisition of CashNetUSA by Cash America International was symbolic across the payday loan industry.

As state legislatures and the federal government crack down on the field, such lenders are coming up with new, creative ways to extend their business. This deal represents the fact that the online payday loan sector is truly taking off.

Numerous payday lenders operate online, including PayDay OK, Sonic Cash, National Payday, and Payday Advance USA. Although their operation is similar to that of the bricks-and-mortar establishments, a benefit of the online presence is the face-saving anonymity of a faxless payday advance transaction.

Advantage of online payday loans: People who might dread walking into a Cash America storefront, for example, might not have the same hesitation to fire up the Net. Hence, why the company is paying $35 million for the online operation, which currently has $22 million in gross payday cash advances.

Right now, the firm estimates the acquisition will bring in an additional $0.04 to $0.05 per share for the current year, primarily in the fourth quarter, and it has raised full-year guidance to a range between $1.89 and $1.98 a share.

Cash America derives revenues from three sources: pawn loans, cash advances, and check cashing. All three have a similarly unsavory reputation, but they generate cash into which any investor would want to sink his teeth. The company's free cash flow (operating cash flow minus capital expenditures) has grown at a rate of 65% for the past four years, and net income has grown in excess of 30% annually.

Critics can - and do - say what they want about bad credit payday loans, but companies specializing in them certainly make a profit.