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.

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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.

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Out of cash with no credit and zero savings? Quick payday advance lenders across Hawaii are looking for people like you.

First, however, you must decide if these products are a good idea.

Wendy Burkholder of Consumer Credit Counseling Services helps people who are drowning in debt. She says her average client has five pay day loans. The problem, she says, is people take out payday loans just to pay off other payday loans. Its a cycle, she says, almost impossible to get out of.

“The target group are the desperate, the uneducated and the needy. That bothers me.”

“Not everybody finds that they have enough money in their pocket to meet their needs, and they welcome our services,” said Craig Schafer, president of PayDay Hawaii.

Craig Schafer owns 11 bad credit cash loan centers in Hawaii. He says clients love the convenience of his services, but even he admits quick cash can create big problems.

“If a person gets into a cycle where they go into our stores, or any payday store, and borrows over and over and over again, that high APR or interest rate equivalent does become a huge issue,” said Schafer.

And not just for Hawaii civilians. According to Navy statistics, 20 percent of military personnel are payday cash loan borrowers, borrowing more than $80 million annually.Paul Belanger, director of Navy-Marine Core Relief Society, said:

“You are going to use your rent money, your car payment money, you are going to use monies you would have used for regular expenses to pay off the loan. And then because you can’t make your car payment, you are going to turn around and you’re going to re-borrow that money on the same day. And that’s legal.”

This year, the Legislature is considering several bills to regulate the industry of fast cash loans. But for now, it’s up to consumers to read the fine print and, more importantly, be smart with their money.