As The Daily Comet states, even when Del. Harvey Morgan introduced legislation in 2002 opening the door to the payday lending industry, he said he knew it wasn’t a good idea.

“I didn’t like payday lending,” he said. “I didn’t think it was appropriate.”

Morgan, R-Gloucester, joined several lawmakers Tuesday in calling for a repeal of the law that allows no faxing payday loan lenders to charge annual interest rates pushing 390 percent. They would face the same 36 percent cap as other lenders.

Morgan said he championed the legislation because the federal government at the time had failed to stop out-of-state banks from setting up shop in Virginia and charging exorbitant amounts for short-term loans. At least with the law, the state could regulate the industry, allowing it to charge no more than $15 per $100 borrowed, with a maximum cash advance payday loan of $500.

Today, the typical Virginia borrower takes out an average of seven payday loans per year from a single lender, often using one loan to pay off another.

“We tried to help Virginians. I think that what we did in Virginia was encourage a chain of debt,” said Del. Glenn Oder, R-Newport News, who broke a prop chain decorated with dollar bills as he spoke at a news conference with lawmakers and VaPERL.

Five bills before the General Assembly aim to repeal the Payday Loan Act, and another six would reform it to require a database to track bad credit payday loans, a cap on the number of loans a borrower can take out at one time or a cooling-off period before a new loan could be issued.

“It’s time for us to go ahead and accept the fact that this was a failed experiment, that there are more alternatives for this set of folks,” said Del. John O’Bannon III, R-Henrico. “At the end of the day I think the time has come, the experiment has been done, it has failed and it’s time to act.”

VaPERL opposes anything other than outright repeal, saying reforms in other states have done little to break the cycle of debt. Even after reforms were enacted, 89 percent of cash advances in Florida go to borrowers with five or more transactions per year, and over half go to those with 12 or more, according to the study.

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Lawmakers heard testimony yesterday on a bill that would radically change the instant payday loan and title loan industries in Montana.

The measure, sponsored by Rep. John Parker, D-Great Falls, at the request of the Department of Justice, would cap the interest rates on such loans at 36 percent, reports The Billings Gazette. It would also cap loans at 25 percent of the borrower’s net income or $300, whichever is less.

Attorney General Mike McGrath said interest rates on some faxless payday loans were as high as 650 percent, forcing some people to borrow more money to pay for their original loan, a situation he called a ”debt trap.”

”And sometimes you can never get out,” McGrath told the House Business and Labor Committee.

Committee members took no immediate action on the bill.

Shawn White Wolf, 34, said he’s paid more than $2,000 in interest on a $400 title loan in the past year. The Helena resident told the committee the businesses that offer title loans are preying on poor people.

”I hope you remember that the poor people, they need protecting, because they are the ones who are affected by this,” he said.

But former lawmaker Jeff Mangan, who wrote similar legislation on short-term loans in 2001, said the right laws were already on the books and the new bill would go too far.

”What this law is trying to do is regulate consumers,” Mangan said.

The bill includes provisions for a database to monitor borrowers with outstanding balances to prohibit them from taking out additional payday cash advances.

Todd Coutts, who owns a loan center in Missoula and co-owns one in Helena, said the new bill would wipe out most of the short-term loan industry.

”I know if this legislation passes it is going to pull the rug out from underneath me,” he said.

But McGrath said the new fast cash advance law would only affect those businesses that are taking advantage of their consumers.

”I think there is room for this business to survive, 36 percent is a very good rate,” he said. ”The good business people…will do quite well.”

Patricia J. Cirillo, president of Cypress Research Group, a market and business research firm, is responding to the Dec. 26 editorial “Modern day usury / Cap interest rates on payday loans” in The Sacramento Bee …

The Bee editorial urging Congress to extend a 36 percent interest cap for military members on short-term loans, in particular online payday loans, to all consumers ignores the real economic outcome:

• Limited options in the marketplace for consumers and increased costs.

Deferred deposit transactions - known as cash loans - are just one competitive choice for consumers who need short-term credit. All of these choices have fees.

But deferred deposit, which is regulated by California’s Department of Corporations, is often the least expensive and most convenient option - an option consumers would likely lose if the interest cap were extended.

Is that a desirable outcome?

Not for the hundreds of thousands of Californians who need short-term loans each year. The reality is that if you need an unsecured, short-term no fax payday loan, there are only a few commercial options. You could let a couple of checks bounce, using overdraft protection from your bank.

This would cost, on average, $54, a bit more than the cost of a $300 payday loan. Or, you could elect to be late on some routine bills - credit cards, mortgage, rent or car payments. Each would incur late fees - for example $39 or more for a credit card late fee, plus interest.

And being late could damage your credit.

A 36 percent rate cap, from a business perspective, would make it nearly impossible for companies to offer payday advances in California. Simply put, the costs (labor, worker benefits, rent, facilities, insurance, interest, etc.) of processing an average loan - which takes about 20 minutes - cannot be covered by revenue from the 36 percent annual rate over two weeks on the maximum $300 transaction California law allows.

In fact, this is why Advance America, one of the country’s largest providers, has announced it will not wait until October 2007 to stop offering transactions to military members.

It is easy to question all short-term faxless cash advance fees. But the fact is the costs to provide a $300 loan are the same as the costs for providing a $3,000 loan. And while a 36 percent rate cap would eliminate choice for responsible consumers, the need for these types of loans will not go away.

The winners in this scenario would be those offering unsecured, short-term credit - both within and outside the law - who often already charge more than payday lenders.

And lack of competition does not lead to decreased costs, just the opposite.

The following is from a study just completed by the Federal Reserve:

A forthcoming study, “Defining and Detecting Predatory Lending,” by Donald P. Morgan, Research Officer, Federal Reserve Bank of New York, and Samuel G. Hanson, Graduate Student, Harvard Business School, concludes that bad credit payday loans are not a “welfare reducing” form of credit.

To the contrary, the authors suggest that payday lenders enhance the welfare of households by increasing the supply of credit.

Noting the difficulty in defining “predatory,” the authors set out to distinguish predatory lending from “the kind that helps households maintain consumption even as their incomes fluctuate.” They examined differences in household debt and delinquency across states that allow payday cash advance lending and those that do not and compared the change in those differences before and after the advent of payday lending.

Particular attention was paid to households that seem more vulnerable to predation (those with income uncertainty or less education).

Excerpts from the report:

• Payday loans are not welfare reducing, or “predatory”

“We define predatory lending as a welfare reducing provision of credit.”

“Our findings seem mostly inconsistent with the hypothesis that [no fax cash advance lenders] prey on, i.e., lower the welfare of, households with uncertain income or households with less education.”

“On the whole, our results seem consistent with the hypothesis that payday lending represents a legitimate increase in the supply of credit, not a contrived increase in credit demand.”

• Payday loans may enhance the welfare of households

“Credit delinquency rates are not higher for households in states with higher payday loan limits.”

“Households with uncertain income who live in states with unlimited payday loans are less likely to have missed a debt payment over the previous year…consistent with claims by defenders of payday lending that some households borrow from payday lenders to avoid missing other payments on debt.”

“Those types of households who happen to live in states that allow unlimited payday loans are less likely to report being turned down for credit, but are not more likely, by and large, to report higher debt levels…”

• Price does not make payday loans online “predatory”: limiting access raises prices

“Higher prices are neither necessary nor sufficient to conclude that a certain class of credit is predatory.”

“We find somewhat lower payday prices in cities with more payday stores per capita, consistent with the hypothesis that competition limits payday loan prices…The problem of high prices may reflect too few payday lenders, rather than too many.”

“Before payday lending…very small, short-term loans may not have been worthwhile for banks. [Lending of payday cash loans] technology may have lowered those fixed costs, thus increasing the supply of credit…That suggests the payday innovation was welfare improving, not predatory.”

South Carolina House members will soon consider limits on savings account payday loan lending, including caps on annual interest rates and restrictions on the number of loans consumers can hold.

A House leader said some limit is likely to be passed this year, with a bill expected to be introduced next week. However, a Senate leader said he opposes that measure in its current form.

Current law allows no fax cash loan lenders to charge $15 for every $100 on the two-week loans. That equates to an annual percentage rate of 391 percent, an amount that is too high and hurts the state’s work force, said Rep. Alan Clemmons, R-Horry, the bill’s chief sponsor.

“The business model is based upon an inability to pay,” he said. “The borrower is enslaved to the payday lender.”

Payday lenders disagree, saying most borrowers pay off their personal loans and use them responsibly. They oppose Clemmons’ bill, saying its proposed 36 percent cap would abolish the industry in South Carolina.

Interest charges on a $100 two-week loan would fall to $1.38, or less than 10 cents a day, said Jamie Fulmer, director of investor relations for Advance America, a payday lender based in Spartanburg. Lenders could also charge a $5 administrative fee per loan.

The revenue is not enough to support a typical cash advance payday loan office, Fulmer said.

Clemmons’ bill matches federal legislation passed last fall that applies to military personnel and their family members. That bill was introduced after some military leaders said they were concerned troops were overusing payday loans and falling into a cycle of debt that threatened their ability to do their jobs.

“If that regulation is good enough for our military personnel, it’s good enough for everybody,” Clemmons said.

Clemmons’ bill has the support of Rep. Chris Hart, D-Richland, who said his district includes many poor and low-income workers living in the Eau Claire and St. Andrews neighborhoods, where many offices providing no faxing payday loans are located.

“If you ride down Broad River Road, every other block has one. They’re sucking the blood out of the minority and poor community,” he said.

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The payday lending industry will tell you it provides a needed service, says an editorial in The Desert News.

Its customers lack access to traditional forms of credit and have such poor credit histories they cannot obtain loans or credit cards.

These faxless payday loan lenders lend money to people who need a few hundred dollars to cover some checks, keep the utilities turned on or even buy food. These establishments tend to be clustered in areas that are poor, heavily Hispanic or near military installations.

But these lenders exact a big price for this convenience. In Utah, cash advance lenders charge an average of 521 percent interest. Some charge as much as 900 percent interest, according to a November 2005 investigative report by Deseret Morning News reporter Lee Davidson.

These establishments tend to be clustered in areas that are poor, heavily Hispanic or near military installations.

While some consumer groups have called on state governments to cap the interest cash loan online lenders can charge, Salt Lake City Councilwoman Nancy Saxton is proposing a different approach. She wants to cap the number of such lenders based on population or to restrict their proximity to one another.

Another option would be to make payday lenders subject to a conditional zoning use, which means the City Council would have to approve such businesses operating in the city.

While some may grouse about government placing onerous restrictions on a legal business, there are many legitimate concerns about how pay day loan lenders operate. No question, they should be able to make a reasonable profit because they serve a clientele that others reject. However, they should not run roughshod over customers just because they can.

Last year, a national study by the Center for Responsible Lending determined that a typical payday loan borrower pays $793 for a $325 loan. In Utah, payday loan stores collect at least $69 million in excess, “predatory” fees each year.

The industry may argue that there has been a proliferation of payday lenders in Utah because there is a need in the marketplace. But it boggles the mind that there are more payday advance loan stores in the Beehive State than there are 7-Eleven convenience stores, McDonald’s, Burger Kings and Subway restaurants combined.

There are 24 payday lending stores in Salt Lake City alone. Councilwoman Saxton says eight of them are within a block and a half of her downtown home.

The problems of instant cash loan lending have come before state lawmakers in recent sessions, but the industry has staved off interest caps amid cries that they signaled a return of usury caps. Such caps were erased by the Legislature in the 1980s.

Interestingly, payday lending stores contributed some $25,750 to the campaigns of winning legislators in the last election.

So the fight moves to the Salt Lake City Council chambers. The City Council needs to take a hard look at this issue to protect people who are already in dire straits.

A crackdown on predatory lending practices is long overdue in this state.

So states a piece in The Olympian.

We were very pleased to see the state Department of Financial Institutions issue fines of more than $1 million to two companies accused of making loans in excess of state limits. It’s the largest payday advance lending enforcement action in state history and involved companies that have offices in Olympia and Lacey.

Advance Til Payday, which has 27 stores in Washington, was fined $557,800. Zippy Cash, which operates six stores, was fined $471,600. Additionally, the companies will have to pay $21,000 for the cost of the state investigation and $39,000 in restitution to customers.

The two firms have common ownership.

According to the state agency, Loren C. Gill is listed as president and owner of WCS Loans Inc., which does business as Advance Til Payday. Daniel M Van Gasken, managing member and executive trustee of Zippy Cash, also does business as Advance Til Payday.

State officials say documents showed that Van Gasken acquired ownership interest in WSC Loans Inc. but failed to notify the Department of Financial Institutions of the change.

The state investigation also uncovered the fact that at the time Gill applied for a license, he did not disclose the fact that the attorney general in the state of Virginia had banned him from the small, cheap payday loan business in 1993. Washington officials say Gill also failed to notify the state agency of an assault conviction in July 2005.

Payday Loan Limit: The state has a maximum loan limit of $700. But the state investigation against the two payday cash loan firms found more than 400 loans that exceeded the limit.

For example, by allowing a borrower to visit offices in Puyallup, Tacoma and Olympia, one Advance Til Payday customer received $2,100 in a single day.

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The Macon Telegraph ran the following, paraphrased editorial:

As the saying goes: “When you have the facts on your side, argue the facts. When you have the law on your side, argue the law. When you don’t, pound on the table and scream like hell.”

That appears to be the procedure two convicted Bainbridge loan sharks are following in their appeal to the Georgia Supreme Court asking that their 49 convictions under the state “payday lender” law be thrown out. This law metes out harsh penalties to lenders who make high-interest online payday loans.

The Associated Press reported that defendants, John Dunlap and Nathaniel Glenn, say they were unfairly convicted under the Georgia law because they were targeted while lending companies whose headquarters are out of state were ignored.

Their attorney argued that the state quick cash advance law violates the federal Equal Protection clause.

If that were the case - and it doesn’t appear that it is - then reasonable people would certainly demand that the state target all whose businesses involve illegal, high-interest loans. While it might be more satisfying to tar and feather such scofflaws and ride them out of town on a rail, we would hope that anyone who violates payday cash advance lending laws would be targeted for prosecution.

Among those who fall prey to these lending scams are low-paid military servicemen and women.

And many times, once a borrower gets involved with a payday lender, charlatans who charge interest rates far beyond what legitimate lending institutions charge, he or she falls into a vicious cycle of having to borrow more just to keep up payments.

In any case, the out-of-state cash loan lenders to which the defendants referred were banks that come under federal regulations and are no longer in business, according to Joseph Mulholland, district attorney for five counties in South Georgia.

The AP quoted him as saying they either moved out of Bainbridge or were shut down by the federal government.

State authorities are to be applauded for prosecuting the Georgia-based lenders, as they should any time someone breaks the law by making illegal loans. We hope this challenge to the bad credit payday loan lender law fails, as did an earlier challenge last year. We don’t need these hucksters plying their trade in our state.

Hundreds of AARP Arkansas members dressed in red filled the Capitol rotunda Wednesday to rally support for legislation to create a program to counsel and inform long-term care seekers of their options.

The group also lobbied for a proposal to penalize payday advance loan lenders who charge interest rates above the state limit.

“If you dedicate yourselves to getting these two pieces of legislation passed this session, I will tell you this: It will happen,” new Lt. Gov. Bill Halter told members of the group before heading to the Senate to gavel the chamber into session for the first time.

About 355,000 AARP members live in Arkansas.

The group distributed draft legislation by Rep. Sandra Prater, D-Jacksonville, that would create the Arkansas Options Counseling for Long Term Care Program. Payday cash advances would be just one focus of the plan.

It would require that those looking for long-term care services and providers in Arkansas be provided unbiased information on their options and on factors to consider when planning long-term care.

More than 85 percent of AARP members in the state want such information, and 75 percent support a law requiring options counseling, according to AARP research the group said it would provide to each legislator.

“I hate to see people not be able to take care of themselves and have to go to a nursing home because they’re in debt,” said Gladys Griggs, who came from Jacksonville with more than two dozen members of her local AARP chapter.

While more than 90 percent of the group’s members said they support using Medicaid long-term care funds to help people stay in their own homes and communities, 55 percent of Arkansas’ Medicaid long-term care budget was spent on nursing home care, according to the 2005 Medstat Report on Medicaid Long Term Care Expenditures.

AARP-Arkansas contends an institutional bias in the system forces many Arkansans into nursing homes.

“More Arkansans will be able to choose to live with their families or near them and remain in their communities as they age,” if the bill passes, AARP-Arkansas President Billie Ann Myers said.

She said the organization also will oppose any legislation to shield nursing homes from liability for abuse and neglect, if any surfaces.

As part of the Arkansans Against Abusive Payday Lending coalition, AARP-Arkansas pledged support for a bill that would fine no credit check payday loan lenders found guilty of charging consumers more than the 17 percent consumer interest limit set by the state constitution.

“It takes that constitutional provision of 17 percent and it puts an enforcement mechanism in it, it puts some teeth in the law and allows a fine of up to $300 per transaction,” said Sen. Shawn Womack, R-Mountain Home, one of the sponsors of House Bill 1036.

The bill is intended to maintain access to short-term credit for people with low income, but also protect them from fast cash advance abuse, Womack said.

“I don’t know what I know about payday loans,” Griggs said.

She said she never got one and does not know anyone who has.

She and fellow member Eunice Stiles attended the rally primarily to support the care options bill and “just to show we’ve got some muscle,” Stiles said.

“So everybody better listen to us,” Griggs said. “We’ll make a racket.”

The payday loan industry is misunderstood.

The Utah Consumer Lending Association (UCLA) is a trade association organized by faxless payday advance lenders in Utah to encourage “Best Practices” for payday lenders so that all consumers are informed and treated fairly, according to the rules and regulations of the industry.

The industry in Utah is highly regulated and it serves an abundance of customers needing quick, unsecured, short term instant cash loans, check cashing services, tax preparation, and other financial services.

Meanwhile, a senior economist with the Federal Reserve in Manhattan has just concluded a report that states:

1) No faxing payday loan lending does not meet the definition of a “predatory lending” product

2) The fewer payday lenders allowed in an area (a city, county or state), the more it costs consumers.

Simply stated, competition limits cash loan online prices. A draft of the report is available upon request.