Saturday, January 13, 2007

A crackdown on predatory lending practices is long overdue in this state.

So states a piece in The Olympian.

We were very pleased to see the state Department of Financial Institutions issue fines of more than $1 million to two companies accused of making loans in excess of state limits. It’s the largest payday advance lending enforcement action in state history and involved companies that have offices in Olympia and Lacey.

Advance Til Payday, which has 27 stores in Washington, was fined $557,800. Zippy Cash, which operates six stores, was fined $471,600. Additionally, the companies will have to pay $21,000 for the cost of the state investigation and $39,000 in restitution to customers.

The two firms have common ownership.

According to the state agency, Loren C. Gill is listed as president and owner of WCS Loans Inc., which does business as Advance Til Payday. Daniel M Van Gasken, managing member and executive trustee of Zippy Cash, also does business as Advance Til Payday.

State officials say documents showed that Van Gasken acquired ownership interest in WSC Loans Inc. but failed to notify the Department of Financial Institutions of the change.

The state investigation also uncovered the fact that at the time Gill applied for a license, he did not disclose the fact that the attorney general in the state of Virginia had banned him from the small, cheap payday loan business in 1993. Washington officials say Gill also failed to notify the state agency of an assault conviction in July 2005.

Payday Loan Limit: The state has a maximum loan limit of $700. But the state investigation against the two payday cash loan firms found more than 400 loans that exceeded the limit.

For example, by allowing a borrower to visit offices in Puyallup, Tacoma and Olympia, one Advance Til Payday customer received $2,100 in a single day.

In the state’s administrative action, the Department of Financial Institutions ordered both companies to stop making cash advance loans that exceed the legal limit.

The department intends to revoke both licenses to offer payday loans in Washington state and ban Van Gasken and Gill from the industry for five years. The companies have a right to appeal.

Online payday loans prey on the poor. Short-term loans have a way of becoming long-term loans with exorbitant finance charges. The state says a 14-day, $500 payday loan with the maximum fee permitted by statute would have an annual percentage rate of 391.07 percent.

That’s criminal.

No one in their right mind would pay that kind of a finance charge. But some people get caught in a financial bind and only dig themselves into a deeper hole by promising to pay back more money than they have.

Part of the blame, here, lies with banks and credit unions that have steered away from short-term loans, forcing customers to go to the payday loan route. It’s time for financial institutions to step up and offer small loans at reasonable rates.

It’s also time for the state Legislature to lower the limits on what payday lenders are permitted to charge.

It’s time to stop preying on the poor.

This entry was posted on Saturday, January 13th, 2007 at 2:42 pm and is filed under Washington.