Thursday, January 25, 2007

Republican lawmakers filed a measure Wednesday that would repeal the landmark state law banning easy payday loan lending and replace it with a new system that regulates short-term lenders.

The state’s crackdown on payday lending, which threatens lenders with stiff penalties for marketing the high-interest loans, has left a void among needy Georgians with poor credit, said state Rep. Bobby Franklin.

“If you don’t have the best credit, and you need some money, and you don’t have money to fix your car, and a bank’s not going to lend you money, what are you going to do?” asked Franklin, a Republican from Marietta who co-sponsored the bill.

The new proposal would create a system of “cash advances” that are two-week loans prohibited by law from accruing interest. Instead, operators would take a service fee of $15 per every $100 borrowed. It also limits customers to borrow only 25 percent of their monthly income and bans lenders from rolling over loans from month to month.

“There’s nothing like that in the country. Nothing. It’s not a payday loan. It’s an entirely different product,” said Jabo Covert, a lobbyist for Check into Cash, a Cleveland, Tenn.-based lender.

Consumer advocacy groups are crying foul.

“It’s an effort by predatory lenders to regain their foothold in Georgia,” said Allie Wall, the director of consumer group Georgia Watch. “They’re making millions of dollars off of triple-digit interest. And here we are having a debate about whether these lenders could come back in.”

The no fax payday advance law, which took effect in 2005, was passed at the urging of military commanders who claimed that young soldiers and their families were being victimized by the short-term, high-interest loans. The law also added stiffer penalties for financiers who make the loans, carrying hefty fines and up to 20 years in prison.

But Covert said it had an unintended consequence.

“The only people we got rid of were the national companies that were willing to follow the law,” he said. “The publicly-traded, professionally run companies left. The bad guys didn’t go away.”

The new proposal, Franklin said, is a way to stamp out the criminal elements that have taken over the cash advance payday loan market.

“You’ve created the need for racketeers, and the organized crime element, to prey on our people,” he said.

The proposal, sponsored by Republican state Rep. Steve “Thunder” Tumlin, has attracted some bipartisan support. Among the legislation’s co-sponsors are Democratic state Rep. Al Williams, the chair of the Georgia Legislative Black Caucus, and Republican state Rep. Earl Ehrhart, who chairs the powerful Rules Committee.

The proposal comes as Georgia’s faxless payday loan law faces a stiff challenge before the state’s highest court.

A pair of south Georgia financiers facing 49 violations of the law have asked the state’s highest court to strike it down. They argue it unfairly targets businesses in Georgia while leaving others headquartered outside state lines untouched.

This entry was posted on Thursday, January 25th, 2007 at 12:32 pm and is filed under Georgia.