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.

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A bill targeting high-interest quick payday loan businesses faced some resistance but managed to win approval Thursday on a 4-1 vote in a key Nevada Senate committee.

The Senate Commerce and Labor committee endorsed Assembly Bill 478, with U.S. Sen. Warren Hardy, R-Las Vegas, casting the lone opposing vote. Other panel members expressed reservations about the bill, but voted to send it to the full Senate.

A few personal cash loan companies have continued to resist the bill sponsored by Assembly Speaker Barbara Buckley, D-Las Vegas, and passed unanimously last month by the Assembly.

Representatives of the businesses insist they are “installment lenders” that should be regulated differently. But the Senate committee rejected their amendments, which would have allowed them to continue to charge high interest rates for long periods.

All providers of payday advance loans charge high interest rates, ranging up to 900 percent, but under the 2005 legislation can only charge such high rates for 30 days. If a lender can’t pay back at that point, the lender must drop the interest rate.

State Sen. Joseph Heck, R-Henderson, said that the bill’s good provisions, including steps to protect the military from no fax cash loan lenders, were important. But he also was concerned about the bill.

“I think we’re going to wind up putting several businesses out of business,” Heck said. “We may wind up revisiting the measure.”

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.

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After lengthy testimony Wednesday about the quick payday loan lending industry and its supposed advantages and disadvantages for Utahns, a legislative committee was left wondering just how much interest it should pay to the topic.

The Business and Labor Interim Committee heard several speakers say the industry needs more regulation to prevent gouging of financially strapped Utahns, but it also heard industry representatives say customer complaints do not warrant more legislation.

While an exact number of such loans has proven elusive — Rep. Phil Riesen, D-Salt Lake, said $452 million a year is loaned to Utahns — the state Department of Financial Institutions in 2006 received only 39 complaints about payday advance lenders, down from 52 the previous year. Of the 39, 32 were about Internet-based lenders, including 27 from nonresidents.

The state has 168 payday lenders with a total of 354 locations. Seventy-nine are Internet-based, of which 27 are based in Utah.

Rep. Lou Shurtliff, D-Ogden, is pushing a bill that would limit bad credit cash loans to $500, give borrowers 30 days to repay them and collect data to better determine the industry’s effects, including the impact on people “caught up in the web that they can’t escape.”

“There are people that are struggling because of payday loans,” she said, noting that payday lender locations are not in more-affluent neighborhoods. “Truth is, many of our citizens are being hurt by payday loans.”

She suggested the low complaint statistics may be due to customers’ embarrassment about their situations.
Riesen noted that Utah has more payday lender locations than all 7-Eleven, Subway, McDonald’s and Burger King sites combined. He wants more oversight of the cash advance industry.

“Payday lenders are taking unfair advantage — some say unconscionable advantage — of those in real need,” Riesen said.

Wendy Gibson, spokeswoman for the Utah Consumer Lending Association, said the association supports education for consumers, but studies indicate online payday loan lenders are an important and less-expensive option for consumers needing money. She suggested holding off on more legislation until determining if the most recently passed law is effective.

Gibson and Kip Cashmore, vice president of the association, said the market is working.

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Years ago, “loan sharks” were among the perennial targets of good-government movements everywhere. Now, Ohio is afflicted with a modern version of the old plague. It’s called the payday cash advance lending industry, and it badly needs to be brought under state control.

You’ve probably seen the explosion of these establishments on the state’s landscape. In barely more than a decade, they have mushroomed from 107 to more than 1,500, all of them existing to suck unsuspecting and poor customers into their web.

Fortunately, an Ohio legislator finally is trying to rein them in. State Sen. Ray Miller, of Columbus, wants to keep fewer people from falling into financial ruin. He recognizes that faxless payday loan lenders are predatory creatures. They give their businesses catchy names like “Easy Money” and “Cashmart.”

Too often, when a person is hard-pressed financially, it is tempting to think about doing business with such lenders. These outfits prey on those least able to repay the bad credit cash loans they get to tide them over until they get another paycheck, and they do so with outrageously high interest rates.

You can easily tell exactly who the businesses target because so many of them are in poorer neighborhoods.

A few months ago we said state lawmakers have an obligation to regulate this exploitative business. Fortunately Mr. Miller stepped up. He wants to cap the interest rates faxless cash advance lenders can charge, limit the number of loans consumers can take, and more closely monitor the operations.

There’s a word in the Bible for above-rate loans - usury - and it once was considered a sin. An outfit called BREAD, for Building Responsibility Equality and Dignity, wants the state to limit the lenders’ annual rate to 36 percent, the same limit the government applied last year to interest on loans for military families.

There’s a big problem, though. Senator Miller is a Democrat. So in the Republican-controlled state House, his recommendations may be ignored. That would be disturbing.

Jamie Frauenberg, president of the lenders’ trade group, the Ohio Association of Financial Service Centers, says more oversight is not necessary because pay day loan customers don’t complain and the need won’t disappear. He’s right to the extent that they don’t complain because they feel helpless.

If there was ever a place for governmental oversight to protect citizens from predators, this is it.

SOURCE: The Toldeo Blade

For the first time since payday advance loans were legalized in Virginia in 2002, the number of Virginians taking the loans out shrunk - even as the number of stores continues to grow.

The state released the official statistics on Virginia’s payday lending industry in 2006.

The number of people taking out at least 13 personal loans during the year also continues to grow, rising to 289,767 in 2006. On average, Virginians using the service took out 8.3 loans. Lawsuits against people who couldn’t pay soared by 38 percent, reaching 12,486, up from 9,039 in 2005.

There were $1.3 billion in payday loans in 2006, up from $1.2 billion. Although there were slightly fewer borrowers, they are taking out a greater number of loans at a higher dollar amount.

The Virginia General Assembly debated a range of new regulations for payday lenders this year, but ultimately did nothing.

They are popping up all across Hamilton. You pass half a dozen of them walking along King Street East between Wellington and James streets: storefront operations with flashy signs promoting “Instant Cash! Money Now! Cheque cashing!”

Believe it or not, payday loan outlets in this city outnumber McDonald’s, Wendy’s, Harvey’s and Burger King restaurant franchises combined.

These instant payday loans are supposed to be short-term loans for small amounts - for emergency or one-time situations. The stores promote quick cash without a credit check.

According to Statistics Canada, the typical borrower is a person with lower employment income and limited or no savings to cover an unexpected expense. Borrowers often have few other options when they run into a financial problem — whether for a needed repair, higher than expected utility bills or a family emergency.

Loans are generally repayable at next paycheck.

To get a payday loan, an applicant needs to provide a post-dated check for the amount of the loan plus interest and any applicable service fees.

The problem is that because the loans cover such short time periods, when added up, the interest and service fees by far exceed the 60 per cent annual rate of interest allowed by the Criminal Code. In real terms it may mean paying $300 on payday to borrow $250 today — still a substantial amount.

Unfortunately, some borrowers are unable to repay the entire amount of the payday advance loan at their next paycheck. Some payday loan companies allow borrowers to renew the loan. It often leads to more interest and more fees - initiating a cycle of deepening debt.

Proponents of the payday loan/check cashing industry say they are filling an important consumer need - banks simply don’t offer small loan amounts. Some clients have bad credit and simply wouldn’t qualify for other financial assistance when they run into a “one-time” financial emergency.

Opponents call the personal cash loan industry predatory and their services a new type of usury.

Both groups acknowledge that the payday loan industry has been operating in a vacuum - without much oversight from government and without adequate protection for consumers.

That may be changing.

Stan Keyes, Hamilton West’s former longtime Member of Parliament, took many in the community by surprise when he accepted the position as president of the Canadian Payday Loan Association.

Keyes wants to change the image of the payday loan industry by pushing tougher regulations that would weed out the industry’s “black sheep” who “conduct bad business practices and charge excessive fees that bring disrepute on a legitimate business.”

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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.

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The state’s highest court upheld the convictions Monday of two lenders charged with violating Georgia’s first-of-its-kind ban on no fax payday loans.

The Georgia Supreme Court, in a unanimous decision, concluded that state lawmakers had a “rational” reason to outlaw the short-term, high-interest loans when they cracked down on the practice in 2004.

The court rejected legal challenges by Nathaniel Glenn and John Dunlap, two providers of payday advance loans who had been convicted of more than 40 violations. The two had argued that the law violated the federal equal protection clause, contending it singled out Georgia companies while ignoring other lenders based just across state lines.

In a six-page opinion, Justice Carol Hunstein ruled that the Legislature had a “rational basis for creating a class” of payday lenders.

Most fast cash loan lenders charge around $15 per $100 borrowed, pushing annual interest rates on two-week loans close to 400 percent. Borrowers who cannot settle up often “roll over” the loan repeatedly, leading to charges that quickly add up. The state banned payday loans in 2004.

Prosecutors claimed that the two lenders tried to skirt the law - which subjects lenders to stiff penalties for marketing the loans - by subtly changing their business practices after the ban took effect.

Dunlap, owner of First Cash Title, began calling the steep lending fee a “CheckGuard,” according to court papers filed by prosecutors.

Glenn, who owned Money Now, started allowing quick cash advance customers to purchase an option to buy a parcel of real estate he owned - essentially, “payday loans in disguise,” according to the brief. It added that no customers ever purchased the land purportedly up for sale.

The two were sentenced to more than 15 years of probation in one of the first successful prosecutions under the new law.

It used to be that low-income consumers didn’t stand a chance of getting a loan.

But today, lenders aggressively court this market with subprime mortgages and payday loans.

“It’s a boom market,” said Matt Fellowes, a scholar at the Brookings Institution, a liberal think tank, who recently completed a study on lending to low-income consumers. “Where 40 years ago lenders were being accused of redlining lower-income markets, now they are awash in credit. In fact, families in the bottom half of the income distribution have been the fastest-growing part of the credit market over the past 20 years.”

But have we gone too far in extending credit (in the form of cash loans online) to low-income consumers – especially those who don’t have much wiggle room if the slightest hiccup throws off their finances?

Definitely, according to Mr. Fellowes. The trouble is, federal policy is stuck in the 1960s, when credit was difficult to get, he said.

“Federal policymakers need to get their foot off the gas pedal in promoting access to credit and start addressing the hard reality that millions of Americans now have too much access to credit,” he said.

More credit, more debt
Just think about all the pre-approved credit card offers that flood your mailbox and the promotions that retailers attach to instant-credit offers.

What we still aren’t doing enough of is imparting to consumers the consequences of taking on credit, not paying off their credit card bill each month and incurring interest charges on resources such as payday advances that could make them indentured servants to their creditors for years.

It’s particularly acute among the low-income. More than 55 percent of lower-income households held debt in 2004, up from 50 percent in 1989, Mr. Fellowes said.

“Total debt held by these households increased by 308 percent during this period, now adding up to over $481 billion,” he said. “Nearly all of this debt is for mortgages and home-related installment trades.”

Not surprisingly, Mr. Fellowes said, more than 32 percent of lower-income borrowers struggle to pay bills on time, and about 27 percent spend more than 40 percent of their income servicing debt. Hence, their use of no faxing payday loan outlets.

“Congress can’t just regulate its way out of this problem,” Mr. Fellowes said. “There are deep, systemic problems with America’s understanding of how to manage money effectively.”

In need of a plan
Mr. Fellowes says what’s lacking is an “intermediary,” such as a financial planner, who would stand between “lenders and borrowers today in low-income markets – someone who basically can take all the options that families have today and evaluate what those different options are and what would make the most sense.”

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