Payday Loan Times

Hawaii payday loan lenders who offer short-term loans are eager to combat the image that they’re locking low-income borrowers into a cycle of escalating debt.

The lenders have teamed with consumer advocates and state lawmakers to establish regulations for the industry.

The move is meant to protect consumers with oversight by the Department of Commerce and Consumer Affairs, but check cashing companies think they’ll reap some public relations benefits.

Some states, such as Arkansas, have seen the number of cash advance companies exceed the number of McDonald’s franchises. In Hawaii, there are about 50 to 60 short-term lenders.

Hawaii is one of only four states that does not actively regulate the industry. It has laws that limit how much interest the lenders can charge, but there is no agency overseeing their operations.

There are, consequently, no accurate statistics on how many people are using the service in the state, nor are there data on whether the no fax payday loan services contribute to financial problems among borrowers.

“We haven’t seen the problem of payday lending here that some of the other communities on the Mainland have,” said Bruce Dillabaugh, deputy director of the Hawai’i Alliance for Community-Based Economic Development.

INDUSTRY CRITICIZED

Quick payday advance companies are criticized for offering short-term loans to low-income clients who can’t pay them back and, as a result, continue rolling them over to the point where they might be paying annual interest rates of nearly 400 percent.

Hawaii law allows lenders to charge a 15 percent interest rate on a loan for as little as 15 days. If a customer, for example, borrows $600 for 15 days, he would pay $90 in interest. If he can’t pay it, he can reborrow for another $90. If this cycle persists for a year, the borrower can end up paying $2,160 on a $600 cash advance loan.

House Bill 483 would prevent that from happening by offering borrowers an extended payment plan after four consecutive loans. The bill will have to be heard by the Senate Commerce, Consumer Protection and Affordable Housing committee by the end of next week to move forward this session.

Committee Chairman Brian Taniguchi said the fast cash advance bill is tentatively scheduled to be heard tomorrow or Wednesday. His interest in the bill stems from national news reports of people continually borrowing off their paychecks and racking up huge debts.

By regulating the industry, “We’ll see if it becomes a problem here, and we’ll be able to monitor it in the future if the problem develops and there are a lot more consumer complaints,” he said.

Ryker Wada, consumer staff attorney at the Legal Aid Society of Hawaii, said one reason for regulation is just to be able to locate the guaranteed payday loan lenders in the first place.

“What we’ve found is most of the businesses are little mom-and-pop single proprietor places,” he said, noting that most don’t have listings in the phone book and may only have a sign in the window. “There’s no real way to enforce the law unless we know who’s doing the payday loans.”

He said Legal Aid, which deals with a large number of low-income clients, hasn’t heard many complaints, but that’s not surprising.

“Generally speaking, they need these services, so they aren’t going to be the ones complaining, even if they know they’re getting a raw deal,” he said.

Click here to read the rest of this Honolulu Advertiser article.