Payday Loan Times

Companies that make money providing faxless payday loans have formed an organization they say is designed to “reform” their industry. (Read on …)

Police believe a man arrested at a Chandler payday loan store this week had developed a scheme to cash checks using fake pay stubs and accomplices posing as his employees.

Chandler police said 52-year-old Clifford Jack Chester tried to run the scheme at the Checkmate Payday Loans store on Alma School Road north of Ray Road when he was arrested.

According to a preliminary police report, here’s how the scam worked:

Chester would recruit accomplices and have them open a checking account in their name with very little money in it. He then would send them into a payday cash advance store to get a cash advance using phony pay stubs he supplied that made the person appear employed. The accomplice would write a check on the account, get a $400 advance then split the money with Chester.

On Wednesday, police were tipped when the store became suspicious of a man trying to cash a check they believed was fraudulent. When officers arrived they stopped the male suspect inside the quick cash loan store and questioned a female suspect waiting in his car.

During questioning, the officer was approached by an employee from the nearby Philly’s Famous restaurant, who said another man was pacing in the restaurant and watching them question the suspects.

According to the report, the man in the restaurant was Chester. After questioning, he admitted he drove the other suspects to the bad credit payday loan store to cash the check. A background check showed Chester was wanted on previous fraud and forgery charges in Scottsdale and Tempe.

Police said Chester gave written consent to have his car searched, where police found a briefcase full of checks, IDs and bogus company documents in his name, along with methamphetamine and prescription drug bottles.

The two accomplices told police that Chester was the “leader of the fake company” and gave police a copy of a cheat sheet for the scam. Police said they found the original in Chester’s shirt pocket.

Chester was arrested on suspicion of criminal impersonation, fraudulent schemes, identity theft and possession of methamphetamine.

Diane Robles, a recently divorced mom, was working as a secretary and going back to school when she borrowed $100 from a payday advance loan lender to make a mortgage payment, a decision that eventually cost her upward of $15,000 in lending fees.

Now a critic of the payday lending industry, Robles said she supports an initiative campaign announced last week that would ask voters in 2008 to put the quick-cash stores out of business.

People such as Rebecca Tuck-White, though, appreciate being able to borrow cash from quick cash loan lenders instead of relying on family members.

Tuck-White was pregnant in 2004 and had put money down on a new home, so she didn’t have cash on hand when her car’s transmission broke. She used a payday loan the way stores advertise them.

“It was literally to bridge the gap,” she said of her $500 loan, which she paid off in two weeks with a $75 fee.

“I don’t think it’s any worse than gambling. There are other social ills out there that could use more attention than the payday loan industry is getting,” said Tuck-White, 31, of Queen Creek.

Still, state Rep. Marian McClure, R-Tucson, who is leading the initiative campaign, said that no fax payday loans ruin lives like drugs ruin lives, which is why government needs laws to outlaw both.

Ending payday loans
McClure wants to outlaw the foundation for payday lenders’ business. She does not want a business to take a post-dated check in exchange for cash today.

For example, a customer who needs $100 immediately writes a check to a bad credit payday loan company for $115. The company gives the customer money and then cashes the check on the customer’s next payday, when the customer presumably will have enough money to cover the check.

If payday lenders were forced out of business, customers would have to find other places to turn for quick cash.

Nancy Lopez of Glendale, who appreciates the payday lenders’ services, took out a loan recently when her cats got sick and the vet bills came. If she could no longer turn to payday loans, she said she would have to go to a pawnshop.

“There’s no other place where you can go and get a small loan anymore unless you go to a pawnshop and put up your heirlooms,” said Lopez, 55 “It serves a niche.”

Once, she said, she had to borrow money from her niece, “which was one of the most humiliating things I’ve ever had to do in my life.”

“What’s more embarrassing?” she asked. “You don’t want to ask your friends for money, and what employers can afford to give money these days?”

Also, Lopez said she prefers cash advances to credit cards because the cards’ late fees and over-limit fees add up quickly.

“You always know exactly what you owe” with payday loans, said Lopez, who works as a customer service representative. “You don’t have any hidden charges. I know I owe exactly $230. No more and no less.”

If payday loans hadn’t existed when Tuck-White’s car broke down, she said she probably would have had to turn to her family, but she wouldn’t have wanted her family to worry.

(Read on …)

Arizona’s major utilities have ended a longtime practice of allowing customers to drop off electric and gas payments at cash advance payday loan centers after a Phoenix community action group brought the matter to light.

Arizona Public Service Co., Southwest Gas and Tucson Electric Power Co. said they had begun the practice as a convenience to customers.

Earlier this month, they said they would quit over concern about potential problems related to regular and faxless payday loans.

“We were trying to do the right thing, with unintended consequences,” said Tammy McLeod, general manager of customer service for APS.

The change has met approval from Arizona Corporation Commission members, the Arizona chapter of the AARP and the Arizona Community Action Association, which advocates for low-income residents. That group helped publish a report earlier this month looking at the practice in Arizona and elsewhere across the country, describing the arrangement as a potential ambush for low-income people to be lured into high-interest online cash loans.

Payday loan centers offer easy-to-obtain, short-term loans to borrowers who promise to repay them plus a fee after the next payday.

The centers, which frequently also cash peoples’ checks, have come under fire for their rates, which some critics say are as much as 400 percent annually.

For years, most of the state’s major utilities arranged for customers paying cash to drop off their payments at pay day loan centers as well as grocery and convenience stores.

Both Tucson Electric Power and Southwest Gas used payday centers as main drop-off sites.

No longer will Southwest Gas Corp. steer customers to Arizona payday loan lenders to pay their gas bills in cash - effective immediately.

The company is terminating the lenders’ role as payment stations for its 1.8 million customers in the state, California and Nevada.

The stunning move to protect consumers comes after a June 12 Tucson Citizen column criticizing Southwest and Tucson Electric Power Co. for their relationships with payday loans lenders. Tucson Electric is “committed to find another option” so it, too, can end its association with payday advance loan lenders, spokesman Joe Salkowski said.

Payday lenders, unfortunately legal in 38 states, charge extremely high fees on small loans, generating the equivalent of 360 percent interest or more.

The no faxing payday loan lenders are ubiquitous in poor neighborhoods, so they’re easily accessible to folks needing to make quick cash utility payments before their power is shut down.

That’s one reason 650 payday lenders are used to take cash payments for 21 large utility chains across the U.S., the National Consumer Law Center found in a June report “Utilities and Payday Lenders: Convenient Payments, Killer Loans.”

Why the sudden policy change at Southwest Gas? “It’s the right thing to do,” spokeswoman Libby Howell said.

“This is incredible and a great example of corporate leadership and responsibility,” said Kelly Griffith, deputy director of the Southwest Center for Economic Integrity. Sending a financially vulnerable consumer into a [fast cash loan] store to pay their utility bill is a recipe for financial disaster.”

Studies have shown that most faxless payday loans are obtained not for emergencies but to pay bills, Griffith said.

“I hope the leadership demonstrated by Southwest Gas will be indicative of a changing social, moral and economic understanding about predatory payday lenders,” she said.

A man wearing panty hose over his head robbed an Arizona payday loan store in East Mesa on Thursday evening of last week, officials say.

Police report that the man came in the payday advance store at 11540 E. University Drive and demanded money about 6:45.

The man took an undisclosed amount of money and fled on foot. He did not brandish a weapon during the robbery.

He is described as White, 25-30 years of age, about 5′5″, with a heavyset build and possible facial hair.

The suspect in the payday cash loan heist was last seen wearing a brown jacket and blue jeans, witnesses say.

The Grand Canyon State is a hotbed of payday loan activity - to the chagrin of many legislators - and as a result, this is not the first time a notable Arizona payday loan robbery has taken place.

Last August, the notorious “cash advance clowns” hit up a number of payday cash loan institutions before being apprehended.

Pretend for a moment that — like most Arizona residents — you make enough to make ends meet but haven’t accumulated much in the way of savings or assets.

Your car breaks down. You need $300 to fix it so you can get to work. You’re not comfortable borrowing from friends or family. You don’t want to max out your credit card, bounce a check or pawn personal items. What do you do?

Providers of payday advance loans each year help thousands of Arizona families overcome unexpected financial circumstances.

When an air conditioner breaks or a car battery dies, Quik Cash and other responsible bad credit payday loan lenders provide convenient access to small amounts of money to cover those costs. Banks don’t — they instead make billions on bounced check and non-sufficient-fund “protection” fees.

Critics, including the Arizona Daily Star, have labeled payday lending as “predatory” without ever having defined what “predatory” means. Recent studies debunk that myth and underscore the fact that before restricting or eliminating such short-term credit options, public officials should better understand the consumer demand for such products and the unintended consequences any such restrictions might create.

Indeed, a January 2007 study by the Federal Reserve Bank of New York found not only that cash advance loans were NOT predatory, but also that by increasing the supply of credit to an under-served market they enhance the welfare of the households they serve.

Another study, by the Indiana Policy Review Foundation, found that further regulation of payday lending has the adverse and unintended consequence of reducing credit options for those who may have few alternatives, and that policymakers should encourage competition in the small-loan market, as competition controls prices.

(Read on …)

Lawmakers deadlocked yesterday on whether to extend the state’s authorization for instant payday loans, creating uncertainty about the fate of a bill that would give new protections to borrowers.

Members of a House-Senate conference committee disagreed over proposals to extend, maintain or erase the current “sunset” expiration date of July 1, 2010, that’s in the state law enacted in 2000 to permit lenders to make payday loans.

Now offered through hundreds of businesses across the state, payday cash loans are for amounts between $50 and $500, excluding fees. They work by having a borrower sign a postdated check for an amount that includes both the money borrowed plus fees. At the end of the loan’s two-week period, the lender redeems the check for the face amount.

The industry and its supporters argue that payday loans fill a marketplace need for small loans for individuals facing a cash crunch. Critics say the industry’s practices results in exorbitant costs for borrowers who cannot afford to immediately repay the loans and end up renewing the loan.

Key provisions of the bill (SB1446), other than the sunset, include limiting a borrower to one savings account payday loan at a time, requiring lenders to check a database to verify that an applicant does not have an existing loan, requiring lenders that use the Internet to sign up borrowers to get a state license, and giving borrowers the right to repay a loan over a longer period than the original period.

As approved by the House on May 1, the bill would have erased entirely the 2010 sunset as part of a compromise in which the industry agreed to new restrictions on its lending practices and accepted new requirements to report to state regulators.

House conferees on Monday held out for that position, but the Senate conferees voted 2-1 to keep the current 2010 sunset so lawmakers can get reports from regulators and review the payday advance loan industry’s performance.

“We have very little information on how this industry is conducting its business,” said Sen. Debbie McCune Davis, D-Phoenix.

Including either proposed sunset would kill the cash advance bill, the end product of at least two years of work that saw the industry make a lot of concessions, said Rep. Bill Konopnicki, R-Safford.

(Read on …)

A veteran state legislator and some colleagues took the first steps Monday to make it a crime to issue a payday cash loan in Arizona.

An initiative drive crafted by Rep. Marian McClure, R-Tucson, would repeal existing laws that permit “deferred presentment” transactions, where a lender agrees to hold a bad check for up to two weeks for a fee of up to 15 percent of the amount. On an annual percentage basis that can be close to 400 percent.

The measure also would make anyone who issued such no fax needed payday loans punishable by up to 18 months in state prison.

Whether that will dry up high-interest, short-term loans in Arizona is unclear. Even McClure conceded lenders might find a way around the prohibition.

But she said if tighter restrictions are necessary she will amend the initiative language to impose an absolute cap on allowable interest, doing that before the first check cash advance petition hits the streets. McClure needs 153,365 signatures by next July (eds: 2008) to put the measure on the 2008 ballot.

She acknowledged she has not yet raised any money and has little hope of bringing in enough to hire paid circulators. Few - if any - measures have qualified for the ballot in the last three decades without hiring people to help gather signatures.

But McClure said she has volunteers who are retired and can spend several hours a day in front of grocery and drug stores with petitions. And she predicted the payday advance idea will have enough support from editorial writers and talk show hosts to compensate for the lack of cash.

The two week loans essentially involve a lender agreeing not to cash a check for up to $500 that the borrower acknowledges is not good. The promise is made to cover that check — plus the 15 percent fee - within two weeks.

Industry lobbyist Lee Miller said the online cash loans fill a need. “We don’t ever think it’s good for the consumers of Arizona to eliminate choices,” he said.

(Read on …)

The Arizona House has approved legislation to give new protections to bad credit payday loan borrowers.

At the same time, the bill helps the faxless payday advance industry by lifting the scheduled expiration of the state law authorizing the short-term loans.

The bill now goes to the state Senate.

The bill would erase the July 2010 automatic repeal included in the 2000 law that authorized payday loans.

Additional key provisions include limiting a borrower to one payday loan at a time and requiring lenders to check a database to verify that an applicant doesn’t have an existing instant cash loan.