Unlike his Staunton counterpart, Del. Steve Landes said he would support a cap on faxless payday loans.

In the past, Landes said he has been one of the legislators who have said that something needs to be done about the high-interest loans and has co-patroned legislation to do away with payday lenders and set caps on the rates that they can charge.

“The cap is at least the minimum that we should do,” Landes said in a phone interview last week.

City Council will decide today whether to approve a resolution that would asking the General Assembly to cap all consumer instant cash loans at 36 percent throughout the state.

In an interview, Del. Chris Saxman said that while he supports reform legislation, setting a specific cap on what a business can charge would set a dangerous precedent.

Landes said this is the first time he has heard of a locality drafting a resolution about payday loans. Localities have taken similar actions with immigration, but the issue is usually something that impacts the locality. This resolution is different because it is more of a statewide issue, he said.

It is always good for local governments to express their viewpoints, but there is not a lot that they can do with this issue at the local level.

A 36 percent cap is reasonable, Landes said. However, he said he would be willing to consider capping the payday advances at a higher rate if that would get something done on the issue. In the past session of the General Assembly, legislators considered capping rates between 36 and 72 percent.

“If there needs to be some negotiation, I’m willing to look at that,” he said. “We’ve not been able to get the payday lenders to agree to some level that most people would believe is fair.”

There are people who want to use a high-interest loan services, Landes said. In order to survive, cash loan lenders need to charge higher rates than other businesses.

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Former employees of a Cincinnati area payday advance lender have criticized the company’s business practices, saying they were pushed to solicit minority and low-income residents and get them to go deeper into debt through revolving loans.

The men, who once worked for Check’n Go, based in Mason, spoke at a news conference Wednesday in Washington, D.C., where they supported efforts to get the Council of the District of Columbia to regulate payday lenders.

At least one state lawmaker in Ohio is proposing a cap on interest rates on fast payday loans.

“We train our sales staff to keep customers dependent, to make sure they keep re-borrowing … forever, if possible,” said Mike Donavan, a former district director of operations for Check’n Go stores in Washington, D.C., northern Virginia and Delaware.

The company has about 1,500 offices nationwide.

William Harrod, a former manager of one of the company’s Washington, D.C. stores, said Check’n Go deliberately targets black communities.

“I was instructed to stick to low-income, black apartment buildings,” Harrod said of his instructions for marketing cash loans.

Check’n Go makes it very easy at the front end for people to get a loan, said Cameron Blakely, another former store manager.

“But at the back end, we made it very difficult for customers to get out of the loan,” Blakely said.

Check’n Go’s response Thursday to a request for comment was a written statement that said the three former cash advance loan employees had made “false and reckless statements regarding the business practices of Check’n Go.”

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The D.C. Council is getting ready to vote on a plan to cap the interest rate on payday advance loans.

Currently, lenders can charge $16.11 per $100 borrowed. The bill sponsored by council member Mary Cheh would drop the maximum interest rate to 24 percent, a little over 90 cents per $100 borrowed.

The council gave preliminary approval in March by a 12 to 0 vote.

In a news conference on the legislation, former employees of an instant payday loan lending service decried the industry’s practices saying they guarantee that the customers will stay for years by allowing them to borrow more money than they take home in pay.

Providers of no faxing payday loans say the proposed caps would put them out of business. They say they provide customers with a choice that does not require a credit check and that helps provide money for emergencies.

A lobbyist for the South Dakota payday loan industry says the industry is well-regulated and there’s no need for the state Legislature to do anymore right now after tweaking the laws several times in recent years.

Short-term credit exists to help people who can’t get loans elsewhere, and too much regulation could stifle competition and push interest rates higher, said Rex Hagg, a Rapid City lawyer representing the South Dakota Short Term Lending Association.

“I guess all we’re asking is, we have this in place, let’s see if it works,” Hagg said. “I think we’ve come an awful long way, and I think it’s working pretty well right now.”

Hagg’s comments came during a meeting of an interim legislative committee assigned to review the regulatory agencies under the state Department of Revenue and Regulation. One of those agencies is the state Banking Division, which regulates moneylenders, including the faxless payday advance lenders.

“The more you regulate, those costs get tacked on,” said Hagg, a former state legislator. “Some regulation is needed, and it’s good. But we’re there.”

Payday lenders generally offer loans of two weeks to 30 days.

Cathy Brandner, deputy director of the Banking Division, said the current law, changed last year, limits such transactions to $500 from one lender at any one time. The borrower generally writes a check, dated when the bad credit payday loan is due, to repay the note. The loan can be renewed up to four times, but each time, the borrower must repay at least 10 percent of the original loan.

Before the change, the law simply had a $500 limit, Brandner told the committee.

The contract also must list the annual percentage rate, or APR, even though many of the payday loans or title loans are for two weeks to a month, she said.

Ohio consumer advocates are concerned that victims of last month’s floods may turn to faxless payday loans to help them get by.

Columbus attorney Paul Bellamy with the Equal Justice Foundation says the short-term loans come with fees that translate to triple-digit interest rates. He says borrowers get caught in a “debt trap” because they often can’t pay up in two weeks when the money comes due, so they keep rolling over the personal loans and stacking up the charges.

John Rabenold is a spokesman for Check ‘n Go, a payday lender based in Mason. He says he doubts that the flooding has brought in more business.

Rabenold also says the cash loan online industry provides an important service for people in tight financial spots with nowhere else to turn.

City Council will consider a resolution requesting the General Assembly to enact laws that would cap interest rates for payday advances and other consumer loans made in the Commonwealth.

Councilman Bruce Elder drafted the resolution with the assistance of City Attorney Douglas Guynn. The resolution would recommend that any loans be capped at a 36 percent annual percentage rate.

“This is something my entire council has an interest in getting moved forward,” Elder said in an phone interview Sunday night.

Elder said the resolution is drawn from a Senate amendment that protects members of the armed forces from predatory lending practices such as cash advance payday loan stores.

“We’re trying to encourage the the General Assembly to do what we perceive is the right thing,” Elder said. “To provide the same protection for our citizens that the federal government has provided for military families.”

The Talent-Nelson amendment capped annual percentage rates at 36 percent for members of the military.
According to the site of the Center for Responsible lending, an individual receives a faxless payday loan after writing the lending company a postdated check that is of higher value than the money they will be borrowing.

The site says many customers renew their loans multiple times, with only one-percent of individuals falling in the category of one-time borrowers.

A November report issued by the center states that payday loans in Virginia averaged an annual percentage rate of 386 percent.

“It is my intent to get this before every city council, town council and board of supervisors in the Commonwealth,” Elder said.

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After 10 years of explosive growth, the payday cash advance industry faces the prospect of tighter regulation as consumer groups and a handful of state lawmakers push for ways to protect borrowers.

In Ohio, payday lenders charge 15 percent interest per $100 over two weeks for these loans. However, critics say the interest rate climbs to about 400 percent when calculated over a year, meaning that a borrower could accrue $45 in additional costs on a $300 loan.

“Turn it this way, turn it that way, it looks like usury to us,” said Paul Bellamy, a research consultant with the Ohio Coalition for Responsible Lending.

Lyndsey Medsker, a spokeswoman for the Community Financial Services Association of America, said that the annual figures for these no fax payday loans are misleading.

“You’re not taking it out for a year,” she said. “You’re taking it out for two weeks.”

The coalition — a group of 160 consumer, faith-based and labor groups — has begun a push this year to cap the annual rate at 36 percent. The group has targeted fast cash loan lenders because it believes they provide high-interest loans to people least able to afford them, keeping them mired in poverty.

Last year, the U.S. Congress approved an identical bill for those companies that provide short-term loans for military personnel. Bellamy said the coalition wants Ohio law to mirror the federal law in this regard.

During the last decade, payday lenders in Butler and Preble counties have proliferated, climbing from four in 1996 to more than 40 last year, the coalition says. Statewide, the number of Ohio payday advance stores grew from 100 stores in 1996 to more than 1,500 in 2006, according to study by Policy Matters Ohio and the Housing Research and Advocacy Center.

This means Ohio has more payday lending storefronts than it does McDonald’s, Burger King and Wendy’s fast-food restaurants, the researchers found.

Ohio Rep. William Batchelder said this growth underscores the need for banking alternatives for consumers who frequent payday lenders.

“A lot of people are very concerned about this,” the Medina Republican said. “I think there is an acceptance that something needs to be done.”

Medsker said her Alexandria, Va.-based trade group wants states to mandate short-term, low-interest payment plans for people who can’t repay their personal loans on time. The association requires its members to allow clients who can’t pay within the two-week time frame to enter into an eight-week payment plan with no additional interest, she said.

Marlies Sanders was driving through the rain in the car - the one she had barely held onto by taking out a personal cash loan - when she got the calls, which went through to her voicemail.

She pulled over. It was her friend, who had just gotten a call from a person calling herself Ms. Medley saying that the Spotsylvania Sheriff’s Department was going to issue a warrant for Sanders’ arrest. The second message was from Medley herself, saying the past-due Allied Cash Advance payday loan debt was a felony because it exceeds $200.

“If I do not hear from you, then I will issue a warrant out for your arrest,” the caller said.

A lawsuit filed by consumer rights lawyer Dale Pittman says Medley was actually an Allied Cash Advance employee impersonating an officer. The lawsuit alleges that Allied Cash Advance started illegally hassling Sanders after she couldn’t pay back a no fax payday loan.

Virginia law prohibits the lenders from threatening borrowers with criminal prosecution if they can’t pay their loan off on time. But the lenders and the collection agencies they hire have been sued by private attorneys and attorneys general in several states in recent years for crossing the line.

The lenders are allowed to sue their customers in civil court, and they are increasingly taking advantage of that right. In 2006, the number of lawsuits against Virginians increased 38 percent, with 12,486 people getting sued for not paying off their online payday loans.

In Sanders’ case, an employee of Allied called from the company’s Fredericksburg office number and left voicemails saying she was with the Spotsylvania Sheriff’s Department, the lawsuit says. It also mentions that impersonating a law enforcement officer is a violation of Virginia’s criminal code.

Pittman, who has other similar cases pending in Virginia, is talking to authorities about pressing criminal charges. In his other cases, companies have illegally threatened criminal prosecution, but this was the first where they actually impersonated law enforcement, he said.

No one knows whether Medley is really the Allied Cash employee’s name.

“We have not determined who it is,” said Pittman, “and we don’t know if it is an alias or not.”

The payday loan company couldn’t be reached for comment at its Miami headquarters, and Pittman said he has heard nothing from them.

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Mark Bohlinger says he can tell when an affluent family is down on its luck: They start bringing their high-end electronics, televisions, jewelry and guns to his College Avenue pawn shop.

“Absolutely, absolutely,” said Bohlinger, owner of City National Pawn. “It’s kind of a fact of life.”

Pawn shops loan money to people, holding items such as televisions or guns as collateral. If the loan, plus about 20 percent interest, isn’t repaid within 60 days, the pawn shop sells the goods.

They’ve long been a source of quick cash for people who have lots of things but no access to credit. Experts, including Bohlinger, say that when a two-income family loses one source of income, they often first turn to the equity in their home, then to credit cards, and then, sometimes, to pawn shops and payday advance lenders.

Bohlinger recently showed off the collateral-holding area of his store, pointing out the big-screen LCD and plasma televisions that have been hocked by people looking for cash. He said very few stolen items are pawned; all items are entered into a database that police can check.

Bohlinger said about 75 percent of the items pawned at his store are eventually reclaimed by their owners, a rate that changes depending on the economy.

When construction slows, he said, he starts getting lots of tools from workers who hope to reclaim them when the economy improves.

“There’s a lot of people who are living paycheck to paycheck,” Bohlinger said. “That would be our main customer base.”

The number of people in and around Fort Collins who are living paycheck to paycheck appears to be increasing, judging from the dramatic increase in payday loan stores within city limits.

Since 2003, the number of payday loan stores in Fort Collins has more than doubled from nine to 20, according to the state attorney general’s office, which regulates the lenders. Growth of faxless payday loan stores statewide has been no less “explosive,” officials say, jumping from 212 in 2000 to 634 today.

The number of pawn shops in Fort Collins increased from six in 2003 to 10 today, according to city licensing officials.

Cash loan stores offer short-term loans to consumers by holding onto the borrower’s signed check. The loan is supposed to be repaid by payday, hence the name, but studies from across the country have repeatedly shown that borrowers just keep rolling over the high-interest loans.

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Sonny Eyabi is president of the Washington D.C. Financial Services Association, which represents more than 40 payday advance lenders in the District.

He penned the following recently for The Washington Post:

When the D.C. Council reconvenes on Sept. 18, it will vote on a bill that would leave District residents without access to payday cash advances - a popular, well-regulated short-term credit product - and put nearly 400 Washingtonians on the unemployment rolls.

The bill, sponsored by Mary M. Cheh (D-Ward 3), would cap annual percentage rates on payday advances at 24 percent. While this may sound like a great idea, it is essentially a ban on the industry. At that rate, lenders would actually lose money on every no faxing payday loan, with a maximum fee of only 92 cents per $100 borrowed.

If the rate cap is approved, the only way for our stores to keep their doors open would be to operate as charities.

We know our customers use payday loans to avoid bouncing checks, as overdraft protection, and to cover late fees on credit card and utility bills. By taking away the option of payday cash advances, demand for this product will not disappear.

For example, the state of Georgia has restricted payday loans in a similar way to the D.C. Council’s plan. In 2006, more than 500,000 cash advances were made to Georgians who crossed state borders so they could deal with unplanned expenses.

Payday cash loans are already strictly regulated in the District and in 38 states. These regulations include a maximum advance amount of $1,000 (including the fee), a maximum fee charged for the loan ($16.11 per $100 advanced) and the required display of all fees in English and Spanish. Would additional reforms help consumers?

Absolutely. To better protect the District’s payday loan customers, we advocate:

• Making sure that customers understand the cost of the product by fully disclosing all fees in simple and easy-to-understand language.

• Helping customers avoid getting caught in a “cycle of debt” by allowing only one rollover and offering an extended payment plan, at no cost, to any customer who cannot pay back the quick payday advance when it is due.

• Verifying that customers have the ability to repay before approving the loan.

• Funding financial literacy programs in the District.

Our members would be required to follow these rules, and we urge the D.C. Council to codify these reforms into law to ensure that all payday loan stores in the District abide by the same regulations.

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