Georgia Payday Loans are Form of “Servitude,” Insurance Commish Says
By Paul RizzoPayday Loan Writer
Characterizing payday lending as a form of “economic servitude,” Georgia Insurance Commissioner John Oxendine vowed Monday to fight legislation that would legalize the high-interest loans.
“As it is now, I would encourage every legislator to vote against it,” he said to The Atlanta Journal-Constitution. “It is bad for consumers. It is a step backward.”
Under the bill (HB 163) introduced at the General Assembly last week, Oxendine would regulate the state’s no fax payday advance lenders. The responsibility would fall under Oxendine in his role as the state’s industrial loan commissioner, a title that gives him the authority to license and regulate finance companies across the state that make loans of $3,000 or less under the Georgia Industrial Loan Act.
Oxendine, who called the legislation “a very beautiful sounding and looking bill,” said the legislation lacked regulatory teeth and sufficient penalties to protect consumers.
“It’s window dressing,” he said.
Faxless payday loan lending has been illegal in Georgia for a century. But payday outlets operated openly across the state until 2004, when the General Assembly shut the industry down by passing a bill that made payday lending a felony, allowed for racketeering charges and permitted potentially costly class-action lawsuits.
Under the bill, payday advance loan could charge a fee of $15 for every $100 loaned. For a typical $300 loan extended for two weeks, the $45 finance charge would compute to an annual percentage rate of 391 percent. Georgia law prohibits annual interest charges above 60 percent for most loans.
Payday lending is legal in 37 states. In Georgia and 12 other states, it is either illegal or not feasible, given the laws on the books.
Proponents of the bill said last week that it offered consumers more protections than any other state where bad credit cash loan lending is regulated. They said the bill would prevent loans from being repeatedly renewed, or “rolled over.”
It would offer also offer a payment plan option, for those who couldn’t cover the debt on their next payday. Moreover, the check cash advance loans would be prohibited for members of the military. Commanders at Georgia’s military bases pushed for the 2004 law, saying too many enlisted men and women who took out payday loans ended up saddled with an endless cycle of debt.
The proposed legislation, whose sponsors include Reps. Steve “Thunder” Tumlin (R-Marietta) and Earl Ehrhart (R-Powder Springs), does not include the tough penalties enacted in 2004.
“I think (HB 163) does not give appropriate protections,” Oxendine said. “It creates a situation that I think is prone to more consumer debt — debt in perpetuity.”
Oxendine said he met with the big online payday loan lenders in December and had offered to work with them on legislation that his office would find acceptable.
“I’m willing to approach that with an open mind,” he said. “They wouldn’t discuss it.”
Jabo Covert, an executive with a Tennessee payday lender who represented an industry trade association at the Capitol last week, said Monday he was not aware of Oxendine’s stance against the bill and did not immediately have a comment.
