Never have lamentations about the plight of the poor been so loud at the state Capitol, and The Arkansas Leader predicts that never will so much harm be done in their name.

The clearest evidence is the working over given a good bill (HB 1036) to halt the depredations of the Arkansas payday loan lending industry, which typically charges poor people from 372 to 869 percent annualized interest on cash loans.

The bill repeals a section of the current law that allows the lenders to count interest charges as “fees” rather than interest, and it would fine a lender $300 each time it charges a person more than 17 percent interest, which is the maximum allowed by the Arkansas Constitution.

If you haven’t been in need of a quick payday advance, here is how it works: In a typical transaction, a worker writes the lender a check for $400 and the lender hands the worker $350 in cash and holds the check for 14 days.

If the person can’t pay off the loan in that time he writes the lender another check for $400, and the process can continue ad infinitum. The huge charges clearly violate the state Constitution under long-established doctrines of the Arkansas Supreme Court, but somehow no one seems able to get a definitive ruling from the court.

So legislation is the best answer.

Rep. David Johnson, D-Little Rock, is the chief sponsor of the faxless payday advance bill and 11 members — a bare majority — of the House Committee on Insurance and Commerce told Johnson they favored it, but he can’t get the committee to vote. By way of history, the Insurance and Commerce Committees of the House of Representatives have traditionally been the Bermuda Triangle where all consumer legislation gets lost. Industry-sensitive lawmakers crowd on to those committees.

At another hearing Wednesday, members worried that if the payday lenders were subjected to too much regulation or, God forbid, went out of business, poor people would have nowhere to turn to get some quick cash before their next paycheck.

And it is expensive, they said, for a business to service these desperate people. (Most people with bank accounts also have a credit card, where a payday cash loan will cost only a small fraction of the payday lenders’ charge.)

Other legislators were opposed to the bill, or so they said, because it exempted pawnshops from the interest limits. Johnson said they were exempted because he did not have the strength to fight the pawnshops, too. Providers of pay day loans are formidable enough. They contribute heavily to the campaign funds of legislators.

No legislator will come out and say that he is for protecting the privilege of the payday lenders to make big profits from capitalizing on the predicaments of the working poor. They always say they are fighting for the poor. So has it always been.

The head of an association fighting to outlaw the payday lenders’ practices was dismayed Wednesday at the trouble sponsors had even getting the bill out of committee. The case for acting is so compelling that he thought passing the bill would be easy. You will not go broke underestimating the General Assembly.

Payday loan company Advance America (NYSE: AEA) will report fourth-quarter 2006 financial results on Feb. 7.

What analysts say, according to The Motley Fool:

Buy, sell, or waffle? Of the nine analysts covering Advance America, five say hold, three say buy, and one defaults with a sell.

Revenues. Revenues for this guaranteed payday loan company are expected to jump to $187.4 million, a 43% increase over last year’s $130.7 million.

Earnings. Profits are expected to grow 15%, to $0.23 per share, with a 13% increase forecast for full-year results.

What management says:
Specializing in cheap payday loans, Advance America has been able to insulate itself from some of the market vagaries competitors who also have exposure to pawn shops and other ancillary services have experienced.

Cash America, for example, recently reported it raised its loan loss provision to nearly $27 million, or more than 37% of cash advance fees, perhaps in expectation of higher defaults on online payday loans granted over the Internet. Advance America saw its own provision for doubtful accounts rise to 22.7% of revenues in the third quarter from 21% the previous year.

The payday cash advance lender notes that its receivables tend to be seasonal and are lowest at the end of the first quarter, matching when people receive their income tax refunds, and highest at the end of the fourth quarter. Therefoes, expect Advance America’s receivables to be higher with this report.

What management does:
Advance America operates under what it calls its “standard business model” whereby it is the party responsible for qualifying borrowers, setting terms and conditions for loans, advancing money to approved borrowers, and assuming the risk of default. Previously, the company had often operated under what it called an “agency business model,” whereby third-party lending institutions performed many of those functions.

In 2005, changes in FDIC regulations precluded that from happening anymore, so all of Advance America’s 2,745 centers operate under the standard business model. It is creating efficiencies for the cash advance online lender, which are helping to boost the bottom line.

Center gross profits, however, feel the pinch of new center openings, which tend to be more costly until they become established. In the third quarter, the company had opened 91 new stores.

One Fool says:
This Motley Fool Inside Value selection has turned around its operations in an industry with an unseemly underbelly. Despite the public and vocal attacks on the instant cash loan business and Advance America in particular, the company has been performing remarkably well and is still valued at less than many of its competitors even though it is the largest of the payday lenders.

With the lowest forward valuation, an increasing presence in this country, and a strong balance sheet, Advance America still seems a good buy at prices still 25% under the annual highs.

ChristiaNet.com, the world’s largest Christian portal with twelve million monthly page loads, asked readers to participate in a new survey by answering the question:

Should Christians get cash advance loans?

The overall consensus of those who participated seems to be that it depends on the reason one is getting the no faxing payday loan. Individual circumstances can vary and sometimes Christians need help.

ChristiaNet’s President, Bill Cooper advises, in a press release:

“Consider the need to the amount of interest charged on cash advance loans. If the need calls for desperate measures, then do some research before making a final decision.”

Out of 317 responses, 111 answered “yes” to the survey question. Many participants in this group felt that sometimes loans are needed to help with negative financial situations. Emergencies often call for needed cash - but it is important to pay back the faxless payday advance promptly to avoid other charges.

Christians shouldn’t go into debt, but sometimes it may be necessary. One participant said: “Everyone makes mistakes and can accidentally get into trouble financially. If you are honest, trustworthy, and capable of repaying the debt, go ahead but pray first.”

The number of participants who answered “no” to cash advance loans totaled 117. Many in this group believe that it is money mismanagement that causes people to result to paying high interest loans. Another wrote:

“The Bible says that being in debt is similar to being a slave. We serve a God that provides for His children but He also wants us to learn good stewardship.”

Looking for a reprieve out of a bad financial situation is good but Believers should seek God and be obedient to His Word for their answers.

Eighty-nine readers were unsure about the answer to the fast cash loan question. Readers seem to agree that borrowing money for an emergency is one thing but making a habit of doing so is another matter altogether. As one reader pointed out: “This should be done on the direction of the Holy Spirit.”

Many in this group acknowledged that everyone’s financial situation is unique. Therefore, it really depends on the situation and why the no fax payday advance is needed. One reader advised: “Just make sure that you can pay back the money before borrowing it.”

The sponsor of a House of Delegates bill to reform the Virginia payday loan industry withdrew his bill Tuesday, three days after it was amended to drastically slash the interest rate lenders could charge.

Del. Lee Ware, R-Powhatan, asked his colleagues to strike the bill from the calendar on the final day for the House to act on its own bills. Another payday lending reform bill has passed the Senate and will be considered by the House.

Ware objected to the amendment to cap the interest rate on the short-term payday loans. Industry representatives agreed, saying that 72 percent cap would put them out of business.

Ware’s bill would have created a database to track payday loans, while restricting the number of loans that a borrower could have at one time, among other provisions.

“We would have had the strongest restrictions on payday loans of any state in the country,” Ware told delegates, saying Virginia could have had “genuine reform rather than backdoor abolition.”

Industry opponents have said providers of payday advance loans charge what amounts to an annual interest rate pushing 390 percent for a two-week loan. Ware argued that comparing the $15 charged for a $100 loan to an annual interest rate when no other fees are charged is misleading.

A 72 percent cap “sounds great … much more reasonable than the astronomical figures that are often quoted as a way of clouding the issue rather than dealing with the actual fiscal reality,” Ware said.

Payday cash advances allow a borrower to write a check for the principal plus a fee. The company holds the check until the customer’s next payday, when he or she either pays off the loan or the lender cashes the check. Opponents argue that the majority of borrowers take out loans from one lender to pay off another, spiraling into a cycle of debt.

In 2005, 445,000 customers took out more than 3.3 million payday loans, according to industry figures.

A 72 percent interest rate cap would have meant check cash advance lenders could charge about $2.77 for a $100 loan, comparable to the amount many automated teller machines charge for withdrawing a customer’s own money.

“Somehow we’re expected to be able to loan $100 for the same amount,” said Jamie Fulmer, investor relations director for Advance America, Cash Advance Centers Inc., the nation’s largest payday lender. “Banks have an ATM fee that has no risk. We’re taking risk in making these advances.”

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Coming soon to a strip mall near you: A neon sign of the times, promising a quick and easy fix to the financial problems that ail you.

“There are more [fast payday advance] lenders and check cashers than there are McDonalds, Burger Kings, Targets, Wal-Marts, J.C. Penneys combined,” sociologist Howard Karger said.

It is a $40 billion industry.

No cash, no credit — big problem, according to some.

“You can have interest of up to $1,000 just on a $200 payday loan,” Karger said.

It’s estimated that faxless payday loans drain nearly $300 million in earnings from Texas workers each year, $4.2 billion nationwide. It’s collected from those who can least afford it - for the most part low-income, working class people who are financially strapped but don’t qualify for traditional loans.“They’re robbing you,” Bernice Labrie said.

People like Labrie.

Although she works 40 hours plus a week as a janitor, she was still having trouble making ends meet. Then she ran across an ad in the Greenpages and decided to take out a $200 instant payday loan.

“I needed some extra cash and I said, hey, I can go do this,” she said.

“Let’s say you want to borrow $200,” Karger said. “You give them a check for $200, and they’ll give you $160 back. It’s usually a two week loan.”

Few actually manage to pay it back in that time.

The industry will tell you it provides crisis cash, a one shot deal to make it through to the next payday. But statistics show that payday lenders collect 90 percent of their revenue from borrowers who can’t pay off their cash advances when due, borrowers who continue to roll their loans over and over and over.

“Most people have to renew these loans eight, nine, 10, 12 times before they’re able to pay it off,” Tomlinson said.

All the while, interest is building.

“Interest rates that run into the hundreds of percent, and in some cases to the thousands of percent,” Karger said.

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This was supposed to be the year that consumer advocates were going to convince the Legislature to pass sweeping reforms for the Utah payday loan industry.

There was talk of a number of measures to protect consumers from abuses in an industry that provides short-term loans at an annual percentage rate of 400 percent - even the ultimate step of capping interest rates payday loan operators could charge Utah borrowers.

But it isn’t working that way. Easy payday loan industry regulation, instead of taking center stage, has been pushed aside by a number of higher-profile issues - such as abortion and school vouchers.

And while a well-organized and well-funded payday industry lobby is highly visible in legislative committee hearings, few, if any, payday loan customers are backing consumer advocates who are demanding reform by marching to the Capitol and detailing egregious abuses

So several weeks into the session, interest rate caps on payday advances has yet to be broached - and probably won’t be this year. Other proposals have yet to progress very far. And those pushing for payday industry reform aren’t all that crazy about the one measure that has made it all the way to Gov. Jon Huntsman Jr.’s desk- Senate Bill 16.

The bill focuses on giving the Utah Department of Financial Institutions the ability to assess fines on payday loan operators who violate state law. Sen. Ed Mayne, D-West Valley City, the bill was endorsed by the department, which regulates the payday advance industry.

But the fact that the industry backed the bill illustrates just how weak it really is, said Linda Hilton of the Crossroads Urban Center, an advocacy group for low-income people that is pushing for reform.

“Senate Bill 16 is a nice thought, but it does nothing in terms of consumer protection,” said Hilton, who also represents the Coalition of Religious Communities, a Utah organization representing a variety of different faiths.

Different payday loan view: Cort Walker doesn’t agree. Walker, operations director for fast cash advance provider Check City and spokesman for Utah’s payday industry trade group, considers SB16 an important piece of legislation for Utah consumers.

The bill clarifies a number of measures affecting lenders. But most importantly, the bill gives the Department of Financial Institutions the power to fine lenders who fail to register with the state or who violate state law, said deputy commissioner Paul Allred.

He thinks the fines are an important step in ensuring that providers of bad credit payday loans adhere to state law.

Hilton said she supports the idea of fines, but thinks the legislation is vague enough - and provides enough discretion to the department - that she worries few companies ultimately will ever face fines. She says the public might never know how effective the measure is because the bill does not require the department to publicly disclose any information about violations of state law or of any fines assessed on individual companies.

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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.

Assembly Speaker Barbara Buckley says several companies are evading Nevada’s payday loan laws by using a loophole that enables them to charge sky-high interest rates - and she’ll push for a law to close it during the 2007 legislative session.

The payday loan law, passed in 2005, limited the amount of interest that companies can charge on the loans and restricted how they can collect from delinquent customers.
The law applied only to short-term loans, which are defined as cash advance loans with a payment period of one year or less. That definition was included to avoid applying the law to banks and other traditional lenders.

Buckley, D-Las Vegas, said most of the companies in the payday loan business complied with the law, but some companies changed their contracts to extend the term of repayment beyond one year.

“Six lenders chose to completely evade the law by rewriting their contracts,” said Buckley. “It has probably affected tens of thousands of people.”

Those new contracts allow borrowers to make weekly payments, while charging interest of up to 900 percent, Buckley said.

Buckley declined to name the companies involved, but plans to hold hearings on the issue. A few of the cash advance payday loan companies are modest in size, but two of them have more than a dozen locations around the state.

Alfredo Alonso, a lobbyist for Money Tree, a payday loan company that follows the 2005 regulations, said his client supports Buckley’s attempts to regulate the industry. The current law already has had some success stamping out “bad actors” in the industry, said Alonso, but the one-year exception should be closed.

“In an attempt to keep the larger banks out of it, they created a loophole,” said Alonso. “It’s unfortunate that people took advantage of that. We believe everybody should be playing by the same rules.”

The 2005 law allows payday loan companies to charge any interest rate for the term of the loan, typically two weeks or a month. But if the borrower fails to pay these no fax payday loans back, the interest rate must drop to the prime interest rate, plus 10 percent.

In today’s market, that would be 18.25 percent.

The law also limits the types of fees that loan companies can charge, and requires them to disclose the fees in the loan agreement.

A bill that would slash the interest rates charged by payday lenders appears dead after a key committee chairman said the proposal won’t get a hearing, reports The Seattle Times.

“I want to do this in baby steps,” said Rep. Steve Kirby, who leads the House Insurance, Financial Services and Consumer Protection Committee. “I have to be a little more thoughtful on these issues than someone who is not on the committee and just puts a bill out there.”

As chairman, Kirby, D-Tacoma, decides which bills get a hearing - and a chance to pass. He said Rep. Sherry Appleton’s push to cap annual interest rates at 36 percent for instant payday loan lenders won’t get to the hearing stage.

Her proposal would give borrowers more time to pay back loans and curb interest rates, which can reach the equivalent of 391 percent annually. Payday cash advance lenders say the bill would drive them out of business.

The lenders offer short-term, high-interest loans in amounts up to $700. A borrower writes a postdated check for the loan amount, plus the interest charge. The lender either cashes the check or collects cash from the customer when the loan is due.

After pronouncing Appleton’s approach dead, Kirby introduced his own personal cash loan lending bill, House Bill 1817, this week. It’s sponsored by all members of his committee and is scheduled for a hearing Feb. 13.

“Rather than the nuclear option, which is just to ban them [payday loans] in this state, we are trying to do things that interrupt the cycle of revolving debt,” he said.

The bill, while leaving fee structures and business practices largely intact, would allow customers to pay back some loans in at least four payments over 60 days at no additional cost.

A borrower could use the payment-plan option only once a year, but it would be available after just one loan. Currently, borrowers can opt into a similar payment plan after four successive loans and are usually charged an extra fee.

Appleton, D-Poulsbo, said Kirby’s legislation “doesn’t change the status quo at all” because most people taking out faxless payday loans borrow so often that one free payment plan would make little difference.

Money Tree CEO Dennis Bassford is more supportive.

“It is certainly a better attempt at good regulation than what it is being proposed by Rep. Appleton,” said Bassford, who leads one of the state’s largest payday-lending chains.

He and Money Tree Vice President David Bassford donated $1,200 to Kirby’s last political campaign.

Jeff Mangan served two terms in the Montana House (1999-2002) and one term in the Senate (2003-2006).

Here’s his recent piece in The Montana Standard, paraphrased:

There is a misconception that there is currently no regulation of payday lending in Montana. As a former legislator from Great Falls, I wrote and sponsored the first piece of fast cash loan lending legislation in Montana in 1999.

The law is called the Montana Deferred Deposit Loan Act, and it does regulate the industry and provide consumer protection in Montana. Current regulations include:

- A maximum loan amount of $300.

- Personal loans cannot be refinanced or rolled over.- The maximum fee allowed is 25 percent of the loan amount.

- No additional fees or charges are allowed besides those permitted by the act.

- Consumers have the right to rescind or cancel the loan within 24 hours at no cost.

- Fast payday advance lenders must provide clear and complete disclosure of terms, fees, and annual percentage rates (APR’s) in accordance with federal laws.

- Every lender is examined by the state on an annual basis to assure compliance.

- Consumers who default on bad credit cash loans cannot be prosecuted criminally.

Proponents of House Bill 29 agree that Montana consumers need and use the services provided by lenders. This is evidenced by some lenders being in business for more than 17 years in Montana. Our neighbors choose payday loans over other alternatives because a payday loan is typically less expensive.

As proponents of HB 29 try to shock you with interest rates, a simple comparison to the unfortunate alternatives makes the choice an easy one for those faced with difficult situations.

Consider these numbers: A $100 deferred deposit cash loan with a fee of $15 translates into an APR of 391 percent; a $100 average overdraft fee of $27.40 equals an APR of 701 percent; a $37 credit card late fee on $100 — APR of 965 percent; a late/disconnect fee of $46.16 on a $100 utility bill — APR of 1,204 percent, and finally, a $100 bounced check with an fee of $54.04 translates into an APR of 1,409 percent.

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