Mark Pearce, the president and chief operating officer of the Center for Responsible Lending in Durham - and a major cash loan critic - has been appointed a deputy state banking commissioner, Commissioner Joseph Smith Jr. said Wednesday.

The job will include oversight of the mortgage, consumer industries and legal divisions as well as working on financial services policy. It would be safe to assume that a major goal will be to continue work on alternatives to payday loans.

Pearce starts work in August. His hiring will probably increase pressure on the state to keep out payday cash advance lenders and push for affordable mortgage and consumer lending instruments for low-income residents. After all, the Center has been critical of payday loans lending, in which companies provide small, short-term loans with an effective annual interest rate of 400 percent or higher.

Smith’s office last year determined that Advance America, then the state’s largest payday lender, had violated consumer finance laws. From there, Attorney General Roy Cooper reached a deal with the last three major companies offering payday loans to leave the state.

Despite talk of a payday loan revival in North Carolina, it doesn't appear likely that cash advances will return to the state.

Therefore, in an attempt to help those in need, North Carolina's top bank regulator is championing a new way for banks to work with people who have bad credit.

"We're trying to develop a basic checking account that meets banks' profitability standards but does not gouge consumers with fees," said Joe Smith, the State Commissioner of Banks.

Until recently, those with a troubled credit history credit turned to instant payday loan lenders for small loans, usually just enough to cover bills until their next paycheck. With payday loan lenders banished from the state this year for charging exorbitant interest rates, some consumers have ended up on the wrong side of banks:

They have trouble qualifying for bank loans, often don't qualify for overdraft protection and end up getting charged fees of $25 to $35 for every bad check they write.

Smith envisions an exclusively card-based "checking" account - NO checks at all - that would prevent users from taking out money or making purchases that would overdraw their account. This would certainly take the place of savings account payday loans.

(more…)

We recently ran the majority of an editoral that criticized the possibility of payday loan companies returning to North Carolina. Looks like that critic wasn't alone. A recent piece in The Fayetteville Observer echoed these negative sentiments:

We won’t bother to ask what they were thinking. They weren’t. Nor were they caring.

It’s inconceivable that any legislator with a conscience could try to bring the scourge of payday loan lending back to North Carolina. But that’s exactly what a group of lawmakers is trying to do. What’s most remarkable about the effort is that many of the bill’s supporters represent the people who have been hurt the most by the usurious practices of payday advance lenders.

The practice of payday loans was finally banned from North Carolina after a battle that raged for years. Even though cash loan lending was made illegal on 2001, lenders found loopholes and continued to offer the loans — which often have triple-digit interest rates — until this year.

A bill filed by Mecklenburg Democratic Rep. Beverly Earle would allow North Carolina faxless payday loan lenders to issue “credit enhancement loans” to customers who are “financially underserved” and can’t qualify for conventional loans. The bill permits payday loans of up to $3,000 at initial interest rates of up to 50 percent.

Chris Kukla, director of legislative affairs for the N.C. Center for Responsible Lending, told an Observer reporter that the bill could permit the same sort of interest rates charged by fast payday loan lenders in the past.

“The APR could be well above 200, or even 500, 600 or 700, depending on how the loan is structured,” he said. “The way this bill is written, it opens itself up to manipulation.”

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The payday loan issue isn't dead just yet in North Carolina. As the industry is debated throughout the state, at least one editorial very much opposes the return of any cash advances. Let's paraphrase what this piece in The Wilmington Star had to say …

Out-of-state cash loan sharks want North Carolina legislators to legalize their racket again. The sharks aren't satisfied with annual interest rates of 36 percent on small loans. They want to charge 60 percent to start with, plus an assortment of fees.

A bill to allow such rates on faxless payday loans is being sponsored by some of N.C. House Speaker Jim Black's faithful servants, including Thomas Wright of New Hanover and Pender counties. Needless to say, that's because these Honorables care so deeply and sincerely about the ability of poor people to get their hands on cash and to improve their credit ratings.

It's not because the payday loan lending industry has made tens of thousands of dollars in "campaign contributions" to Jim and the Black sheep. In fact, the payday advance lending industry has been remarkably generous to Honorables of both parties. And in many cases, these philanthropists didn't even want to brag about their contributions to good government.

Their places of residence and their positions in the industry weren't always listed, or listed accurately, in campaign finance reports.

At least, that's the contention of Joe Sinsheimer, a Democrat who apparently remembers that his party once claimed to represent the little guy, not the fat quick payay loan cats who pounce on little guys. Sinsheimer filed a complaint with the State Board of Elections about what he says are "false, incomplete or misleading" campaign finance reports.

According to him, regional legislators whose online payday loan lender contributions were not reported entirely accurately included Democrats Thomas Wright, Dewey Hill and Edd Nye, and Republican Danny McComas.

The latest proposal from the pals of payday advance lending would, in effect, repeal last year's legislation that forced these cash-sucking leeches to leave the state. At the moment, the bill might not get through the N.C. Senate, where a few semi-honest Honorables seem to survive.

But it might pass the House. Nothing seems too low-down for that crowd.

The North Carolina payday loan industry may be on life support, but it's still breathing. State officials and consumer groups are concerned that a new bill from a local lawmaker could resuscitate the industry, which was effectively killed off earlier in '06, the Charlotte Observer says.

N.C. Attorney General Roy Cooper, a Democrat who played a central role in forcing payday loan companies out of the state, said a bill sponsored by Rep. Beverly Earle, a Democrat from Mecklenburg, would permit lenders to begin issuing small personal loans to consumers — with interest rates that are too high.

"We shouldn't rush to replace payday lending with another product that could hurt people who have trouble making ends meet," Cooper urged.

Earle said her bill does not allow interest rates as high as payday loan firms charged, but does allow higher rates than the state maximum of 36 percent. Customers considered to be bad credit risks aren't eligible for unsecured loans, she said.

"There needs to be a vehicle out there where people can get small loans. The banks don't do it," Earle said.
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Sorry, North Carolina payday loan lenders, you're still barred from practicing in the state. 

The N.C. Banking Commission voted unanimously this morning to uphold a ruling that forced the payday advance lending industry to leave the state. Advance America had already closed its stores in anticipation of December's ruling outlawing payday loans from the area.

But the Spartanburg company also appealed, seeking the right to return. The board, which oversees Smith, upheld the ruling with no discussion, following a recommendation from a committee.

"A civilized society does not allow these kinds of interest charges," board chair and state treasurer Richard Moore said after the vote.

The company can now appeal to the state court system. The chances of cash loans returning to North Carolina are not very strong, though.

The Fayetteville Observer is reporting that people needing quick cash loans now have an alternative to getting money for emergencies without paying steep, and often endless, interest rates.

Fort Bragg Federal Credit Union, Pentagon Federal Credit Union Foundation and the State Employees Credit Union are offering short-term loans of up to $500 for those who need money between paychecks. Before, these borrowers used would turn to cash advance loans for an advance on their next paycheck.

Those payday loans were often coupled with interest rates that were twice as expensive as a credit card late fee, according to the Center for Responsible Lending in Durham. Payday loan companies stopped operating in March after years of pressure from the state attorney general.

Now, military members, Defense Department personnel, state employees and their spouses can get emergency loans with either zero or minimal interest rates. The ARK loans - which stands for Asset Recover Kit - require a $6 one-time fee at Fort Bragg Federal and Pentagon Federal. If the program is used more than once, the borrower must attend consumer counseling.

“I don’t think there is any other low-cost alternative out there,” said David Elliott, chief executive officer of the Fort Bragg Federal Credit Union.

No delinquencies on these loans

So far, borrowers at military credit unions have not had any delinquencies in paying back the loans, and the counseling is going so well that Pentagon Federal has a full-time counselor at its Skibo Road branch. (more…)

Former Democratic vice presidential nominee John Edwards said that payday loan companies should be more strictly regulated during a trip to Iowa over the weekend, writes the Waterloo-Cedar Falls Courier. Edwards said that payday advance lenders victimize Americans who are worried about things as basic as paying rent or feeding their families.

“They don’t have anything they can fall back on, so the result of all that is they’re just laying open and vulnerable for these predators to take advantage of them,” Edwards said.

Critics complain that payday lenders charge interest rates topping 300 percent, which can make paying short-term loans back a challenge, even though the terms are so short (two weeks is the standard).

Car-title loans are similar to payday loans, but require consumers to put their vehicles up as security. Those who cannot pay back the cash advance and high interest charges have their vehicles repossessed.

(more…)

Advance America was the first to go.

Now it’s time for Check ‘n Go office (located in Statesville) to call it quits. In ordr to avoid further legal action from Attorney General Roy Cooper, who alleged the payday advance industry was inherently unfair, lenders in the state have been shutting down state.

“From a customer standpoint, they are going online or to another state,” said John Rabenold, a spokesman for Check ‘n Go. “It’s a net loss for the state of North Carolina. Roy Cooper has never come to our store, but the customers do every day, and they have always expressed appreciation for our services.”

The company had 65 offices in North Carolina - and there’s a good chance these customers are not just crossing the border for South Carolina payday loans.

Elsehwere, employees are still working at the First American Cash Advance office on Venture Lane. Spokesman Bob Manning said:

“It is the company’s intent to continue to operate its store locations in North Carolina during this transition period and will now offer limited products to its customer base under existing North Carolina laws.”

The company is trying to get relicensed to operate as a consumer finance lender. (more…)

Celeste Collins, executive director of Consumer Credit Counseling Service of WNC, penned an editorial to The Citzen-Times this week. In it, she showed gratitude and happiness for the elimination of payday loans in North Carolina. To wit:

At Consumer Credit Counseling Services, we’ve seen them: families on the verge of losing their homes because of fees spent renewing payday loans; parents afraid of arrest because they’re unable to pay off their balances; calls from low-wage employees whose jobs were in jeopardy because of unrelenting collection calls.

What was the enticement of payday loans?

The way they were advertised, payday loans seemed to be the perfect solution to those times when there was too much month left at the end of the money - small loan amounts for short loan terms (generally two weeks).

Simply write a check to the payday company for up to $300, they cash it and keep a mere $45 fee.

Yeah, $45 for a two-week loan.

What?

Surely the happy payday loan customers featured in the TV commercials were having an easy time repaying the loans.

Not really.

Calculate the annual percentage rate on payday loans and you’ll find it’s 400 percent or more.

Thanks to the N.C. Attorney General’s Office and the N.C. Commissioner of Banks, payday lending in North Carolina came to an end this month.

North Carolina consumers won’t fall prey to the deceptive advertising and predatory interest rates of payday lenders, which tried to hide behind out-of-state financial institutions to bypass North Carolina law.

And the good news is that consumers who owe these payday lenders will only have to repay the principal amounts. While that may still be difficult for some, it’s nothing compared to the financial hole they were digging with the payday loan.

N.C. Attorney General Roy Cooper is counting on the Consumer Credit Counseling Service agencies in North Carolina to work with consumers who are trying to create a plan to pay off payday loans and stabilize their finances.