Grace Jones is executive director of Couleecap, a private nonprofit 501(c)3 charitable organization created in 1966. She recently wrote in to The La Crosse Tribune. It’s paraphrased here:

As families celebrate the holidays, keeping finances in check can be quite a challenge. Despite working hard, many families live paycheck to paycheck, struggling to meet day-to-day expenses or to build a cash cushion for emergencies.

Lacking resources and financial education, families are vulnerable to money traps such as no fax payday loans, a quick growing form of predatory lending in America.

Payday loans do not come cheap. Interest rates and fees typically run between 650 percent or 780 percent APR; The average, supposedly cheap payday loan ranges from $100 to $500; A typical $500 two-week loan will cost the borrower $650 to repay.

According to one study, 91 percent of payday loans are made to repeat customers, cash-strapped workers who fall into a debilitating cycle of high-cost debt. These repeat borrowers often pay far more in interest and fees than they ever received in cash advances.

There are currently 488 payday lenders in Wisconsin, 24 in the four-county service area of Couleecap (counties of La Crosse, Monroe, Vernon and Crawford). Although payday loan companies are licensed by the state, there is no statutory maximum on the interest rates or fees that they can charge.

If you already have one no fax cash loan outstanding, you may find it very difficult to pay the required finance charge payments, much less paying all or a portion of the amount financed when the loan comes due.

If you need a larger, longer-term loan, you should seek other, more traditional, lending sources.

An Ontario judge has certified a class-action lawsuit against payday loan companies that claims their rates are excessive.

The suit seeks $515 million from Money Mart and its parent, Dollar Financial Group.

The plaintiffs argue that short-term payday loans end up costing borrowers interest rates that are criminally high.

The action alleges that Dollar Financial and Money Mart “conspired, among other things, to unlawfully cause the plaintiffs to pay interest at a criminal rate.” None of the claims have been proven in court.

The plaintiffs’ lawyer, Harvey Strosberg, says he’s “delighted” the suit can proceed and says he hopes to get it to trial as quickly as possible in order to prove how unlawful cash loans can be in the country.

The class action was started by Margaret Smith of Windsor, Ont., on Dec. 23, 2003. The lawsuit is going ahead in the absence of legislation to make payday loans legal.

A bill is going through the parliamentary system right now for just such a purpose , but no payday cash advance law exists yet.

A spokesman for the Canadian Payday Loan Association said from Ottawa that the umbrella group representing the industry will not comment on the lawsuit.

Georgia’s new crackdown on payday advance loans is facing a stiff test as two financiers charged with 49 violations of the law are asking the state’s highest court to strike it down.

According to The Macon Telegraph, Nathaniel Glenn and John Dunlap are challenging the law in the Georgia Supreme Court on grounds that it violates the federal Equal Protection clause by unfairly targeting businesses in Georgia.

Prosecutors claim that the two tried to skirt the new law - which threatens lenders with stiff penalties for marketing the short-term, high-interest regular or online payday loans - by subtly changing their business practices after it took effect in May 2005.

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

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

Both have been sentenced to a year of probation for violating the no faxing payday loan law along with another 15 years of probation on a racketeering violation.

Gilbert Murrah, the duo’s attorney, said the two sought to comply with the law.

“They were trying to avoid violating the law, but they couldn’t because the law was written so vaguely and broadly,” he said.

He said the law victimizes businesses based in Georgia but exempts others from its stiff restrictions solely because their headquarters are based outside state lines.

The case represents one of the stiffest challenges yet to the quick cash loan law, which was passed at the urging of military commanders who claimed that young soldiers and their families were being victimized by the short-term, high-interest loans.

The law also added stiffer penalties for financiers who make the loans, carrying hefty fines and up to 20 years in prison. And it makes payday lending punishable as a felony upon the fourth conviction.

The cash advance law has already withstood one challenge. It was upheld in 2005 by a federal appeals court despite contentions from 11 out-of-state financiers who sued the state to prevent enforcement of the law.

 
Banking trade groups want the Pentagon to narrowly apply a law that caps interest rates and fees on military payday loans only and not to other credit services, according to a letter obtained by Reuters on Friday.

Congress recently passed legislation that imposes a 36- percent cap on annual interest rates and fees that lenders can charge on credit cards and other instant cash loans provided to U.S. military personnel. The law, passed last year, was tucked into a Defense Department authorization bill.

“Our primary concern is that a broad application of the legislation could have the unfortunate impact of … harming servicemen and women and their spouses and dependents by limiting their access to credit or increasing their credit costs,” the letter said and The Washington Post reported.

Banking lobbyists are worried the law essentially creates another regulator, the Pentagon, which will be required to work with federal banking regulators to implement it by October 2007.

The law has financial institutions scrambling to find ways to avoid being affected by the cap, which lobbyists say sets a worrisome precedent that could spill over into financial products outside the military.

The letter, dated January 5, is signed by five trade groups: American Bankers Association, Association of Military Banks of America, Consumer Bankers Association, Independent Community Bankers of America and America’s Community Bankers.

In the letter, which is addressed to David Chu, undersecretary for personnel and readiness, the banking groups urge the Pentagon to implement the law to apply to payday advances, which can carry high fees for small denomination, short-term loans.

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A federal bank regulator is trying to get state-chartered banks to offer short-term, small-dollar loans in an effort aimed directly at the payday loan industry. The Wichita Eagle reports.

Last month, the Federal Deposit Insurance Corp. proposed that the banks it regulates offer the loans, generally $1,000 or less, citing a “huge demand” for them but “far too few low-cost options available.”

“It’s a way to provide alternatives to [faxless payday loans],” said FDIC spokesman David Barr.

Some local bankers are skeptical that offering such loans will be cost effective for them, while others think it can be done profitably for a few banks.

Fast payday loan lenders said they welcome the competition, but don’t think that banks will be able to compete effectively with them.

“It lets the consumer choose among a variety of products,” said Steven Schlein, spokesman for the Community Financial Services Association of America, a trade group that represents the payday, or deferred presentment, industry.

Rocky Waitt, president of Rose Hill Bank, thinks it would be tough for his bank to offer short-term, small-dollar loans profitably.

He’s not swayed, either, by the FDIC’s enticement that it would look favorably at banks when they are examined for their lending practices to minorities and disadvantaged businesses. The FDIC regularly examines banks for lending to those groups under the Community Reinvestment Act.

Banks are heavily governed by state and federal rules, and typically have caps on the annual percentage rate they can charge - well below the 391 percent APR some quick cash loan lenders charge.

” (Payday lenders) don’t have near the red tape that we do,” Waitt said.

But Mike Daniels of Kansas State Bank of Manhattan said he has seen models of how banks and credit unions are offering such loans profitably. But those models require that a bank have “large numbers to get economies of scale.”

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Barbara Evans is director of Alabama Watch. She recently wrote in to the Montgomery Adviser …

I applaud the Montgomery Advertiser for its series on payday loans, and I have reviewed the letter from Darrin Andersen, president of the Community Financial Services Association of Alexandria, Va., stating that consumers have the smarts to make the correct choices for their lives.

Consumers may have the smarts, but the state of the economy and job conditions make it difficult to make the correct choices.

In this materialistic society, where a person’s worth seems to be measured by their credit rating or their possessions, working class families find themselves working two and three jobs to survive, and relying on payday advance lenders to get them out of the seemingly never-ending crises that occur in their lives.

I am reminded of many years ago, when I was forced to go on welfare. On Christmas, there was no money for toys, and I was desperate to get my son a Big Wheel. I would have done anything to get that toy for him. I ended up not paying my rent to get the toy, and we later got evicted. It was a stupid choice to everyone but a single mother.

Alabama Watch believes that a small loan is a small loan, no matter what kind of loan it is, and that small personal loans ought to be regulated by the Alabama Small Loan Act. It isn’t fair to consumers or other lenders to carve out special laws for special lenders, and it is disingenuous to consumers to do so.

We don’t have the lobbying strength of the well-financed quick payday loan lenders. We are also weakened by the fact that families in crisis with poor credit have nowhere else to turn. The payday lenders have a strong argument when they compare their rates to the bank overdraft charges, which are now approaching $40.

We are accosted by a constant barrage of credit card offers in the mail. I get about 15 per week. Homeowners are a marketing target for equity lenders. It sounds great to combine car loans, credit cards and other debts into a new mortgage, but it causes some people to lose their homes.

Marketing of cash loans, equity loans and credit cards is a huge business, and they know how to get to people who are looking for a way out of a bad situation. It is unfair to blame consumers when we are targeted by big business and when most of us are at the wall financially.

Alabama Watch provides preventative education to consumers on a number of issues such as payday cash advances, but our bottom line lies in our legislative and court systems.

Until we have a fair and nonpartisan way to elect judges, until the guy with the most money stops winning elections, until we stop selling our democracy for money and power, we will be at a terrible disadvantage.

The only home is for consumers to organize, become well educated and band together to force change. We hope we can continue to be a part of that change.

State regulators levied a record $1.2 million in penalties against two payday cash advance companies Thursday, moving to ban the owners from doing business in Washington after investigators alleged they had violated state lending limits more than 400 times.

The Department of Financial Institutions accused the owners of Zippy Cash and Advance Til Payday of exceeding the state’s $700 maximum loan limit for outstanding short-term, high-interest cash advance loans to a single person.

The companies, which together operate 33 lending stores in Washington, skirted the law by allowing customers to obtain thousands of dollars in loans from different branches, often on the same day, according to the state’s charging papers and The Seattle Times.

Reportedly, one customer borrowed $2,100 in a single day by taking out three $700 loans from three Advance stores. In several cases, customers took out several loans the same day they paid off others, turning short-term payday loans into long-term debt with triple-digit interest.

Payday loan law: Under state law, lenders can charge interest fees as high as $95 for each $700 loan. For a typical two-week no faxing payday loan, for example, a customer could pay $285 to borrow $2,100.

“The larger the amount of the loan, the more it becomes a long-term loan and a more expensive loan for the borrower,” said Deb Bortner, the Department of Financial Institution’s acting director of consumer services.

Advance Til Payday, which was fined $557,800, is owned by Loren C. Gill and Daniel Van Gasken. Zippy Cash, which was fined $471,600, is owned by Van Gasken. As part of the penalties, the companies also were assessed investigative costs.

The companies can request a hearing on the charges.

Efforts to reach the companies’ owners were unsuccessful.

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A City Council committee moved Wednesday to keep new payday loan businesses from opening in Kansas City.

The Kansas City Star reported that the Finance Committee voted for a moratorium on business and occupation licenses until June 30, while a task force investigates industry practices. The moratorium would apply to payday, title and signature loan businesses.

The full council is to consider the measure today. It would not affect regular and faxless payday advance businesses already open.

Mayor Pro Tem Alvin Brooks said the moratorium was needed to keep payday loan businesses from moving in from other cities passing similar measures.

Gladstone in October approved a moratorium on instant payday loans.

“Other communities on both sides of the state line are considering this,” Brooks said. “We want to certainly support small business, but we have a responsibility to look out for the safety of our citizens.”

Judy Hadley, city revenue commissioner who will lead the task force, said it would look into whether the fast cash loan businesses focused on poor areas and whether they followed state and federal laws.

Legislation that would further restrict predatory lending has been introduced in the Missouri General Assembly. Cash advance businesses have drawn attention as politicians have accused them of victimizing customers.

Now that the holidays are over, many Americans are beginning the climb out of staggering holiday debt that often looms long and large after the season is gone. Some will turn to bad credit payday loans.

Adam Levin, former New Jersey state consumer affairs director and Credit.com founder, may not agree with that strategy, however. But he does say the most important step in digging yourself out of debt is to create a plan.

“Look at the different interest rates on your credit cards,” he advises. “Pay off the ones that have higher rates first.”

If you can transfer a balance to a card with a lower rate, go for it. However, when you transfer certain balances, keep in mind that the existing balance on the card will likely stay at a higher rate. (But one that’s still lower than that on a cash advance.)

Do not under any circumstances, warns Levin, take a cash advance loan from a credit card to pay off debt on another. Cash advance rates are very high and cards also typically charge fees for the advance.

If you received a Christmas bonus, dedicate that to paying down the holiday debt. Whatever bills you ran up during the holiday season, pay them off on time. It’s best to make more than the minimum payment, but if you can’t, at least pay the minimum.

A late payment can trigger a universal default which causes rates on other cards to rise. But remember: “Minimum payments will keep you in debt forever.”

That’s why people end up rolling over cash advances and owing thousands in the long run.

You can also negotiate with your creditors for lower interest rates. But if you do get a better rate, Levin says you have to follow through. “You can’t make a deal with someone and then have late payments.”

Predatory lending has become a nationwide concern. So begins a straightforward article in The Sulphur Daily News.

With the holidays behind us and the credit card bills on their way, consumers should be aware of what predatory lenders look for in their target victims. But before one can recognize predatory quick cash advance lenders and their tactics, you must first understand the nature of the beast.

Predatory lending is the practice of convincing borrowers to agree to unfair and burdensome loan terms. The most common predatory lending abuses occur in pay day loans, credit cards, and overdraft loans.

Predatory lenders often are accused of being discriminatory because they target the poor, the elderly, college students, and most recently military families.

Their marketing tactics include aggressive solicitation, home improvement scams and other too-good-to-be-true offers, which all end up costing the borrower exhorbitant amounts of money in the form of high annual interest rates and excessive fees.

Consumers who have overextended themselves during the holiday season may begin to feel the pinch in January and be looking for financial relief by accepting a tempting credit card offer or no fax payday loan.

The most common type of predatory lending in our area is payday loans.

If your look around town, you will see the numerous payday loan establishments that have cropped up in the last couple of years. These storefront businesses prey on the poor and the uninformed.
It’s not hard to see how easily the payday advance loan can dig a bigger hole of debt rather than help the borrower out of a short term crisis.

The Center for Responsible Lending says payday borrowers on average receive 8 to 13 payday loans a year. Moreover, 90 percent of payday lenders‘ revenue growth comes from making more or larger loans to the same customer.

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