Payday Loan Times

Due to deceptive collection practices and threatening with abusive language while attempting to collect debts for a payday loan company a Jacksonville, Florida collection agency has been sued. (Read on …)

The City Belle ville Council has taken aim at the number of quick payday loan businesses in town.

An ordinance approved Monday limits to three the number of consumer installment loan or payday lending businesses that may operate in the city.

The ordinance also requires owners of the businesses to receive a license from the city and the state, if required under the state Consumer Installment Loan Act.

“Payday lending practices often have an unreasonably adverse effect upon the elderly, the economically disadvantaged and other residents of the city. Frequently, taking [payday loans] puts borrowers in much worse financial shape than before they took the loan,” the ordinance states.

Industry representatives contend that payday lenders fill a demand and help borrowers cover unexpected expenses and pay for basic needs until their next paycheck.

Online payday loans typically are short-term loans for which a customer writes a post-dated check for the amount of the principal plus a fee that the lender cashes on the next payday. However, the term frequently is used to describe businesses that provide short-term installment loans and those that trade cash for vehicle titles.

City Attorney Robert Sprague said the nine payday lenders already open in Belleville will be grandfathered in under the new law.

The Fairview Heights City Council passed an ordinance earlier this month limiting payday lending businesses to two. City leaders have said there are three currently operating.

A state study found that a 2005 law regulating Illinois payday loans saved borrowers $20.6 million in loan fees and interest charges over 18 months.

The good news is tempered by the fact that payday lenders have been moving into longer-term, high-interest loans not covered by the reform law, according to consumer advocates.

“Our worst fears have been realized,” said William McNary, co-director of Citizen Action/Illinois. He said lenders have told his organization that less than 5 percent to 10 percent of the personal loans they now issue are payday loans, because they don’t make money the way they used to.

Payday loans are short-term loans for small amounts of money secured against a post-dated check. The industry says the loans provide people with quick cash for emergencies, but consumer advocates say the loans prey on the poor with triple-digit interest.

The law limits the interest that can be charged for supposedly low fee payday loans to $15.50 per $100 and caps loans based on a borrower’s pay, along with other reforms.

Before the law took effect, the average finance charge for short-term loans was $20 per $100 borrowed for a 14-day loan and $45 per $100 for a 31-day loan, according to the Illinois Department of Financial and Professional Regulation report. The average finance charge offered since the reform law was $15.36 per $100 loaned.

Because of the reforms, “consumers are better protected from falling into an endless cycle of debt,” Gov. Blagojevich said in a statement.

“It’s clear that the law is working as intended,” said Bob Wolfberg, president of the Illinois Small Loan Association. He said the industry now makes less money off bad credit cash loans, which has forced lenders to offer different products, including longer-term loans.

On average, 45,000 to 60,000 payday loans are issued in Illinois every month. The law defined payday loans as loans for less than 121 days. Statistics on payday loans have only been kept since the law passed in December 2005, so it’s not clear if there’s been a big drop since the law passed.

The state financial regulation department has pushed rules that would eliminate the loophole, so that longer-term no fax payday advance loans could also fall within the law.

Department spokeswoman Sue Hofer said the department hopes Tuesday’s report will “stir some discussion.”

Illinois has just ordered Global Payday Loan to stop issuing loans to state residents. It also has fined the payday loan company $234,000 for charging excessive interests rates.

But the decision raises the broader question of whether states should regulate Internet conduct that crosses state lines.

The investigation began after a complaint from someone who borrowed $300. The cash loan in question fell under an Illinois provision that capped annual finance charges at 36 percent.

State investigators found serious problems with the transaction. For one thing, the loan was written with a six-day term, which did not give the borrower sufficient time to repay the loan. Furthermore, the fees on the loan exceeded the $15.50 per $100 allowed under Illinois law.

In addition, the annual percentage rate on the loan interest rate came to 2,190 percent, as the borrower was required to repay the $300 loan, plus a $90 finance charge just six days after the check cash advance had been originated. According to the Illinois agency charged with loan oversight, Global Payday then continued to violate the borrower’s rights by sending her e-mail warnings and making phone calls asserting that her account was delinquent and demanding payment.

The subsequent fine cost Global Payday $234,000. All well and good, right? Not necessarily.

According to the state’s notice of order, Global Payday is located in Jenkintown, Penn., and Salt Lake City - not in Illinois. By offering online payday loans over the Internet, the company is making such loan opportunities available to potential borrowers in all of the states, not just Illinois.

While Illinois might want to flex its muscles to protect its citizens in regulating fast payday loans in certain ways, other states may want to impose different legal requirements. In so doing, a company like Global Payday that seeks to engage in Internet business across state lines might be nagged by uncertainty when it comes to figuring out cross-border legal compliance.

Constitutional arguments could be made that state efforts to regulate e-business that, in part, comes within their borders improperly burdens interstate commerce. The argument could be made that only the federal government has authority uniformly to regulate. Such arguments have been made in other contexts. But there remains much uncertainty.

Coming months - and years - will likely determine how much authority states truly will have when it comes to Internet regulation.

An online payday loan firm has been ordered to stop issuing loans to Illinois residents and was fined more than $230,000 on Wednesday by the Illinois Department of Financial and Professional Regulation for issuing a $300 payday loan with an interest rate of more than 2,000 percent.

The order and fine were issued against Global Payday Loan, doing business as Payday-Loans-Yes.com, which was ordered to cease operations in the state and pay $234,000 for charging Illinois customers excessive interest rates and violating the Payday Loan Reform Act, according to a release from the IDFPR.

The order invokes the largest fines ever imposed on a payday cash advance lender, with the total fine including:

• $1,000 per day for acting as a payday lender without a license
• $1,000 for making a payday loan with a term of less than 13 days
• $1,000 for assessing finance charges in excess of $15.50 per $100 loaned
• $1,000 for failing to verify that a payday cash loan was permissible under the PLRA
• $1,000 for failing to provide a consumer with notice of the right to a repayment plan
• $10,000 for interfering with the Division’s authority to examine a lender’s books, records, and loan documents
• $10,000 for engaging in unfair, deceptive, and fraudulent practices in collecting a cash advance, according to the release

The department investigated a complaint by a consumer who borrowed $300 through the company’s internet website, and found several violations, the release said.

The loan was written with a six-day term, which does not allow sufficient time to repay the loan; and fees on the loan exceeded the $15.50 per $100 allowed in Illinois. The annual percentage rate on the loan was 2,190 percent, the release said. The bad credit cash loan company also failed to provide the borrower with a statement explaining her rights, including the right to initiate an interest-free repayment plan.

The company continued to violate the consumer’s rights and still sends her e-mail warnings that her account is “seriously delinquent,” the release said.

As of April 1, the borrower had already paid the lender $360, which is $13.50 more than the company was entitled to collect under the PLRA. In April, the woman and her employer received several calls demanding additional payment, with Global representatives asserting the unpaid balance on her online payday advance was $630.00.

“I have been in the middle of a nightmare, and I will be glad for it to be over,” the borrower (unnamed for privacy reasons), said in the release. “These people are sharks, and I don’t owe them any more money, and don’t deserve to be harassed by them. That’s why I filed the complaint with the state.”

Global Payday Loan was also ordered to provide documents showing whether it has made loans to any other Illinois consumers, the release said.

File boxes stuffed with documents containing the personal information of fast payday loan customers were found in a trash bin Tuesday morning.

The trash bin off North Prospect Avenue in Illinois contained documents from Check into Cash, a company that issues payday advance loans. The bin, in an alley adjacent to the shopping center in which Check into Cash is located, contained boxes filled with hundreds of papers, such as consumer loan documents, account registers, collection notes, customer history reports and customer information sheets.

They included Social Security numbers, addresses, photocopies of driver’s licenses and other personal information.

“Wow. That’s something,” said Roberta Hazen, who with her husband, Roger, has taken out no fax payday loans from Check into Cash. “Why did they just dump it? Nowadays you should shred everything before you throw it out. They should have been more cautious.”

A Check into Cash manager who declined to give his name said the boxes were mistakenly thrown away and employees, when alerted to the mistake on Tuesday, promptly removed them from the trash.

The payday loan company takes privacy issues very seriously, and it is not company policy to throw out documents such as those found in the Dumpster, the manager said.

The company has initiated “a very thorough investigation process to find out what happened,” said Lauren Hosie, associate general counsel for Cleveland, Tenn.-based Check into Cash. “We’re taking steps now to remedy what happened,” she said.

The cash loan company has fired the employee responsible for the disposal of the documents. And it is in the process of notifying customers whose information was in the trash.

“This puts their customers at risk for identity theft,” said Paul Stephens, policy analyst with the Privacy Rights Clearinghouse, a California-based consumer advocacy group.

An identity thief could use personal information such as Social Security numbers to pose as someone else and open cell phone accounts, credit cards and other accounts. A state law that took effect in January makes it a crime for people to knowingly facilitate identity theft by throwing out information that the public could gain access to without shredding or destroying the information.

“The law states that you have to prove a person who was lax with these business records had the intent to commit identity theft or some violation of the Illinois Financial Crime Law,” said Champaign Deputy Chief Troy Daniels. The department does not have any plans to open an investigation into this cash advance payday loan matter.

(Read on …)

Each time 57-year-old Ruby Price had to take out a payday loan, it cost her dearly.

When she borrowed $400 from Advance America, the finance charge on five monthly payments, with no late fees, was $810. When she borrowed $750 from Check ‘n Go, she paid the loan off early, but the price tag still amounted to $1,191.

Then there was the cost to her self-esteem - both at the thought of how much she was paying and about how her credit union, CEFCU, had denied her a personal loan each time even though she’d paid back two auto loans without incident.

“When I was accepting these loans, I was thankful I could get them because the need was immediate, and I had no money of my own,” she said. “But I knew I was being taken advantage of.”

Price, who is supporting six dependents from the salary she earns as a nurse at a Bloomington nursing home, was among the speakers at an anti-payday lending rally attended by more than 100 people Saturday at St. Peter’s African Methodist Episcopal Church.

Illinois Attorney General Lisa Madigan, the keynote speaker, urged the state House to pass legislation already approved by the Senate that would make the Payday Loan Reform Act of 2005 applicable to all no fax payday loans that exceed an annual finance charge of 36 percent instead of only those with a term no longer than 120 days.

“Payday lenders depend on the borrower’s inability to pay off the loan at the end of its term, forcing the borrower to take out a new loan to pay off the old one, generating additional fees,” Madigan said. “They disproportionately market their lousy loans to women, minorities and members of the military.”

She also called upon financial institutions to offer alternative faxless payday advance loan products that can sustain families temporarily without “shackling them to a treadmill of debt.”

Cheryl Merkel, president of the Central Illinois Credit Union in Champaign, and Jeannette Sheets, manager of the CEFCU Decatur member center, then went to the podium to outline the alternatives they offer.

Central Illinois Credit Union has earned more than $8,200 in profits by offering to its members payday alternative loans at 21 percent interest since July 2005, Merkel said.

Only $300 can be borrowed initially, and repayment must be made within six months. Cash advance loan borrowers also are given the option of opening a rainy day account and receiving a $30 bonus for saving at least $10 per month for three months through automatic payments from their checking accounts.

(Read on …)

John Baird doesn’t want to live in a community of people embittered by losing their hard-earned dollars because they couldn’t get a conventional loan in an emergency.

That’s why the Decatur resident has been participating in a campaign to shut down companies that he says ensnare customers via Illinois payday loans with interest rates averaging 550 percent annually.

“This hurts good people who are working and trying to make it,” Baird said. “They may not have a good credit history, so they go to these places and don’t understand the predatory nature of these loans. Before they know it, they have huge balances due, and they lose their cars, even their homes.”

That’s why Baird, 61, a member of the peace and justice task force at Central Christian Church, joined a peaceful protest April 18 at Advance America’s office at in Springfield and why he will attend an anti-payday loan rally Saturday in Decatur, Ill., set to feature Illinois Attorney General Lisa Madigan.

“Payday loans can provide quick credit,” said Madigan spokesman Scott Mulford, “but they can be an expensive and potentially devastating way to borrow if an individual has to extend a loan through another pay period.”

Central Christian Church, along with St. Peter’s African Methodist Church and the Decatur branch of the NAACP, organized the event as members of the Central Illinois Organizing Project.

The organization also is pushing for legislation that would close loopholes in the Payday Loan Reform Act of 2005 by making it apply to all loans that exceed an annual finance charge of 36 percent, instead of only those with a term no longer than 120 days.

The Illinois Senate passed a payday advance loan bill last month, and the House has the measure under consideration.

Ian Schwab, an organizer with the Central Illinois Organizing Project, has spoken to Decatur’s Human Service Agency Consortium, among other local groups, to generate interest in the campaign.

He said efforts are also under way to get more area financial institutions to offer alternatives to payday loans - with the Central Illinois Credit Union in Champaign, Community Plus Federal Credit Union in Rantoul and Imperial Credit Union in Springfield being the only ones he’s aware of that do.

Another protest was held at Advance America in Bloomington April 28.

Jamie Fulmer, director of investor relations and based in Spartanburg, S.C., would not say whether the payday advance loan giant would send anyone to Saturday’s rally at the invitation of the Central Illinois Organizing Project.

He called the earlier protests “publicity stunts,” staged without warning to intimidate employees and not intended to open a civil dialogue.

(Read on …)

Driving around Peoria, you probably see them all over. But what are you really getting yourself into when you sign up for a fast payday loan, asks one opinion piece on CentralIllinoisProud.com?

In need of some quick cash? Consumer advocates at the Better Business Bureau say, if you can help it - don’t go to one of those payday loan places.

“The problem with many of the payday loan concepts is people take the money and find out that they can’t pay it back in a timely manner,” Bonnie Bakin of the BBB, says.

Payday loans work like this: the establishment will ask you for a recent pay stub. You’re asked to write the company a personal check that’s dated for when your next paycheck comes. The company will grant you the loan, but keep in mind; the check you’re writing them is for more than the total of your loan. You’re paying extra to cover fees and interest.

“Usually it comes with a pretty steep fee,” Bonnie explains. “At this time, there’s nothing illegal about that.”

Worked out to an annual percentage rate, your interest fee could be upwards of 300 to 400 percent. And most payday lenders only give you two weeks to pay it back. The BBB says that’s when people can get into trouble. Many are forced to roll their loans over, again and again.

Bonnie says, “Until that person owes more money than they could ever imagine paying back.”

It seems you can’t go far in Peoria without running into one of these quick payday advance locations and experts say that’s the point. They say owners are setting up shop in strategic locations so they can suck as much money out of you as possible.

“They’re targeting the most vulnerable.” Tony Pierce a member of the Central Illinois Organizing Project, a faith-based group working toward justice for all citizens, including payday lending issues, said. “The average person taking out a payday loan makes only about 25 thousand dollars a year.”

Pierce says payday cash loans should be illegal, and his organization is working with the Illinois House and Senate to close loop-holes in payday lending. “In my opinion that’s loan sharking, which used to be illegal when the mob did it,” he says.

Tony’s mentored people who’ve gotten themselves deep into debt after taking out a payday loan. But, according to the BBB, very few people actually come forward with complaints. They’re either too embarrassed, or they don’t know how to properly file a complaint against the lender.

“These people can’t go to a bank,” Bonnie says. “These people have a bad credit rating, a bad work history - there’s something that prevents them from going to their bank to do this and that’s what makes them a target.”

She says if you absolutely must take out a check cash advance, there are some things you can do to protect yourself:

• Shop around for the best and lowest interest rates
• Make sure you find out what your responsibilities are in the transaction, and read your contract carefully
• If there’s something in it you don’t understand, don’t sign it until someone explains it to your satisfaction

But if you can’t pay back the loan, the BBB says the payday lender can take money out of your paycheck, take you to court… and ultimately, you could end up in jail.

“My advice to anyone in the public that would even be considering going to a no faxing payday loan lender is don’t, in capital letters. Don’t do it,” Tony warns.

We tried to contact a half dozen different payday lenders in Peoria. The businesses either didn’t return our calls, or they declined our request for an interview.

The ads are on the radio, television, the Internet, even in the mail. They refer to instant payday loans and tell people how easy it is to turn a “check into cash.”

Until last year, Wood River remained free of these type of lenders, but since then, two have opened and two more are expected to open.

“It’s too many for a city this size,” Wood River Mayor Fred Ufert said. Ufert wants to “stop payment” on the number of businesses that would be able to open in city —population 11,300.

“(The city) wants to do something to regulate them before it gets out of control,” he added.

He said the short-term payday advance loan lenders prey on financially vulnerable residents with exorbitant fees and cast an image of a community in decline. He said that during the past several years, the city has worked hard at bringing development to town, and these businesses are detrimental to the process.

“I don’t want to see them pop up all over town, either,” he said. “It just doesn’t look good.”

The companies tend to cluster in low-income neighborhoods. The businesses make small, short-term, high-rate payday cash advances that go by a variety of names: payday loans, cash advance loans, check advance loans, post-dated check loans or deferred deposit check loans.

Whatever the company calls the loan, it basically allows a borrower to write a personal check payable to the lender for a set amount, plus a fee. The company then lends the amount, minus the fee, for a two-week period.

When the loan falls due, the borrower either can renew the loan for an additional fee or repay the loan. If the borrower fails to appear in person or renew the personal loan, the lender can process the borrower’s check to recover the funds.

If the account is short, the borrower could face additional penalties from their bank, as well as the costs of the loan. The loan may incur additional fees or an increased interest rate as a result of the failure to pay.

In December 2005, Illinois enacted the Payday Reform Loan Act. It prevents easy payday loan lenders from preying on unsuspecting borrowers. The law limits what lenders can charge, restricts customers to no more than two loans at a time and establishes a state database to ensure the law is followed.

According to the Illinois Department of Financial and Professional Regulation, between 45,000 and 60,000 payday loans are issued in Illinois every month. Since the act went into effect, the state has fined lenders more than $500,000.

In October 2006, Congress passed a law that capped lending to military personnel at 36 percent annual percentage rate. The U.S. Department of Defense called the lending “predatory,” and military officers cited concerns that payday lending exacerbated a soldier’s financial challenges, jeopardized security clearances and even interfered with deployment schedules to Iraq.

Some federal banking regulators and legislators seek to restrict or prohibit the fast cash advance loans not just for military personnel but for all borrowers because the high costs are viewed as an unnecessary financial drain on the lower and lower-middle class populations who are the primary borrowers.

(Read on …)