The Canadian Payday Loan Association (CPLA) recently credited the federal government for moving swiftly to allow provinces the authority to regulate the cash advance industry.

Bill C-26 was approved by the Industry Committee yesterday before the House of Commons rises for the Christmas break today.

The CPLA says the new law will balance strong consumer protection with a viable industry by giving authority to provinces to regulate the faxless payday loan industry as long as they introduce legislation to protect consumers and set a clear maximum on the cost of borrowing.

In November 2006, the provinces of Manitoba and Nova Scotia passed legislation to regulate payday lending and will be setting the maximum permissible fees early in 2007.

The governments of British Columbia, Alberta, Saskatchewan and New Brunswick have all confirmed their intent to introduce similar regular and online payday advance legislation early in 2007.

“We have seen a big push this fall to balance strong consumer protection with the need for a viable industry,” said Stan Keyes, president of the CPLA, in a news release. “In the Canadian industry, there are two types of players - those who are serious about consumer protection and those who are only interested in gouging consumers and lining their own pockets. We need to put the worst players out of business so the best industry leaders can provide this needed service at reasonable rates.”

Keyes also expressed disappointment with the Consumers Association of Canada (CAC). The CAC has called on the government to stop all efforts to regulate the quick cash loan industry.

“Manitoba - an NDP government - was the first to ask the feds to let them regulate this industry,” said Keyes. “British Columbia, Alberta, Saskachewan, New Brunswick and Nova Scotia have all stepped up and called for the authority to regulate. The federal Conservatives, Liberals and NDP want regulation. Payday loan customers support regulation. Canadians writ large support regulation. Even the leaders in the payday loan industry want regulation. I’m very concerned that the CAC is totally out of step with the consensus on this issue.”

Upwards of 2 million Canadians use payday loans every year. The CPLA represents 500 of the 1,350 stores operating in Canada today.

Let adults take responsibility for their own actions. Such is the stance of the following, paraphrased editorial from The Seattle Times:

Beginning Oct. 1, 2007, no U.S. lender may charge more than 36-percent interest to a military person on active duty, or his family — a measure Congress aimed principally at protecting soldiers from payday loans.

Several states have effectively banned such loans; in Oregon, a 36-percent cap goes into effect July 1. A group led by the Service Employees International Union is pushing for a similar cap in this state.

Rep. Sherry Appleton, D-Poulsbo, has introduced such a bill.

“We’re not asking for a ban,” Appleton told a Senate hearing in Olympia Dec. 1, but a ban is what it amounts to.

Current Washington law sets a ceiling of $15 in interest and fees per $100 loan amount, up to a quick payday loan of $500. If you want $100 for two weeks, you write a check for $115 and postdate it. For your C-note, you are paying $1.07 per day, which sounds reasonable enough. It is, however, an annual rate of 391 percent.

The new usury cap would impose a 91-percent price cut on a $100 payday loan, reducing the fee from $1.07 a day to 10 cents. Says Dennis Bassford, CEO of Moneytree Inc., Tukwila: “We cannot lend $100 on 10 cents a day.”

Banks and credit unions can grow fat on lending rates less than that. But Washington law forbids payday cash advance lenders from making a loan of more than $700, or for more than 45 days. The average loan is $385 for 18 days.

Payday lending is a Starbucks business, selling succor a cup at a time. When you buy a latte at Starbucks, the amount you’re paying per pound of coffee beans is like that 391-percent interest. It is a number you don’t want to know.

But really, you are paying for more than beans. You are paying rent on the storefront, wages and benefits for the barista, and for the corporate network.

It is the same with cash advance payday loans.

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As Defense officials begin their work on regulations to implement a federal law that caps interest rates at 36 percent on small consumer cash loans to military members, they are tackling some big questions.

One such question:

• Whose fault is it if a no fax payday loan lender or other lender loans money at higher interest rates to a service member or dependent if the person either inadvertently or purposely conceals their connection to the military?

That question is not addressed by the recently passed law, so it will be up to the Defense Department to deal with it, said Robert Lee, counsel for the Federal Deposit Insurance Corporation, at a conference Dec. 6 hosted by the FDIC.

Officials with FDIC as well as other regulators and organizations will be working with the Defense Department on questions like this as they craft their rules to put the payday advance loan law in place, Lee said.

Since the statute specifically refers to a knowing violation of the law, Lee said, if a financial institution does not know that the person has a military affiliation, it is possible that the financial institution would be protected under the law.

The cash loan law takes effect Oct. 1, 2007, or earlier, if the Defense Department finalizes its regulations before then.

In response to a recent bill regulating payday loans being defeated, The Virginian-Pilot basically has the following to say: we’ll see about that.

Here is its recent, paraphrased take on the situation:

Maybe the three committee members who didn’t show - including Portsmouth’s Kenneth Melvin - will oppose payday advance lending when it resurfaces in the 2007 General Assembly.

That’s the most optimistic take on last week’s 10-8 defeat of a proposed repeal of the quick-fix lending practice that ensnares scores of Virginians in a sinkhole of debt.

If attorney Melvin, who missed the meeting because of a murder trial, and two other absent Democrats support repeal when the idea comes up again next month, then a repeal measure on instant payday loans can go forward to the full House.

Or if Virginia Beach Del. Terrie Suit, the only South Hampton Roads committee member to oppose the repeal, can be persuaded to change her mind, that would help too.

Perhaps Suit and other industry backers will be persuaded by a coalition of faxless payday loan lending critics so broad that it spans the conservative Family Foundation, the liberal NAACP, veteran s’ groups, faith-based organizations and consumer advocates.

All urged lawmakers to dial back loans on which annualized interest rates average almost 400 percent. Suit prefers a compromise bill that intends to curb the worst of the predators, but is likely to give no more than lip service protection.

Dismayed by the number of servicemen whose security clearances were being jeopardized by crippling debt, Congress already has decreed that interest on cash advances to military personnel can’t exceed a standard 36 percent annualized rate.

Virginia lawmakers should be no less concerned about the poor, the young and the elderly, who typically take out payday loans as a quick fix to a financial emergency. The problem for consumers, and the windfall for lenders, comes when a borrower winds up taking out a second or third loan to pay off the first, as many do.

According to Jean Ann Fox of the Consumer Federation of America, the typical user of such payday cash loans takes out 12 or more per year. According to the North Carolina-based Center for Responsible Lending, the typical payday borrower winds up shelling out almost $800 for a $325 payday loan.

No matter how convenient the loan may seem at the moment it’s received, that’s a Faustian bargain in the long run. Those who set lending rules have an obligation not to encourage enticements that are far too good to be true.

As recent reports show, more and more Americans are applying for regular and faxless payday loans. What accounts for such popularity?

The following are a few fast facts regarding consumer debt in the country, courtesy of Moneymanagement.org. They help explain why so many individuals are anxious to use payday cash advances in order to quickly pare down their balances.

* Up to 85 percent of employees use work time to deal with personal financial concerns.

* Nearly one-third of workers admit that money concerns interfere with job performance.

* Financial problems (including debt and late online payday loan payments) are linked to increased levels of stress, conflict, and marital stress, as well as decreased levels of marital satisfaction.

* University administrators say they lose more students to credit card debt than to academic failure.

* Up to 40 percent of employees have said their health has been affected by financial problems.

* Consumer debt stands at more than $2.4 trillion.

Overall, Americans carry an average of $5,800 in credit card debt from month to month. Think about that. It’s little wonder they turn to resources such as instant cash loans.

Afterall, if making only the minimum payment on that debt every month, it would take 30 years to pay off - and that includes an additional $15,000 in interest.

Iowa Democratic leaders are joining with Attorney General Tom Miller in pledging to pass new restrictions on car title loans, while also considering such acts in the face of increase payday loan use.

Democrats, who gained the majority in the Legislature in last month’s election, predict a bill to restrict the industry will be introduced during the first month of the session, which starts on January 8.
Consumers who get car title loans put up the title to their car as collateral. They can face annual interest rates as high as 360 percent. Missing a payment can mean the loss of a car. Those that miss a cash advance payment simply face increase fees the next time around.

Senator Joe Bolkcom, an Iowa City Democrat, says he’ll push the restrictions as part of a larger package dealing with predatory lending practices, such as payday advance loans and other dangers to consumers.

A Wichita legislator wants to place a cap on the interest charged by faxless payday advance and car title loan stores - an annual rate that is currently as high as 390 percent a year.

Rep. Melody McCray-Miller, D-Wichita, and a grassroots community group hope Kansas can follow in North Carolina’s footsteps, explains The Wichita Eagle.

That state used to have about 1,000 companies that made short-term loans to consumers before it began enforcing a cap on interest rates.

Now it has none.

Although Sunflower Community Action says its goal is not to drive every payday loan company out of Kansas, it does seek tighter restrictions.

“Whatever they’re doing in North Carolina should be what’s done everywhere,” said J.J. Selmon, community organizer for the northeast chapter of the group.

Selmon and other leaders from Sunflower recently returned from a meeting in Washington, D.C., where officials from several states talked about how they are regulating the industry.

Supporters of the industry say bad credit payday loans are a good alternative for people who can’t borrow money elsewhere. They say the industry fills a need not met by traditional financial institutions, which typically do not make small-dollar loans.

A 36 percent interest rate cap similar to that in North Carolina would force payday loan stores to close, said Whitney Damron, a lobbyist for the Kansas Payday Loan Association.

The industry says that groups that are critical of cash loans are trying to take choice away from consumers.

Damron challenged Sunflower Community Action to find a way to provide short-term loans to consumers.

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Despite interest rates that can range close to 400 percent, thousands of Washington state residents are flocking to instant payday loan outlets for quick cash.

According The Bellingham Herald, The Washington Department of Financial Institutions recently released a payday lending report showing that payday loan outlets in the state made nearly $1.4 billion in small loans in 2005.

As recently as 2000, the dollar volume of those loans was $580 million. The number of individual loans shows similar growth - from 1.8 million loans in 2000 to almost 3.6 million last year.

Dennis Bassford, president of Renton-based MoneyTree Inc., says his company and others like it provide working people with a convenient shortterm solution to financial difficulties. But critics of the payday advance industry see it as a trap for the unwary.

For Bellingham resident Rhonda Bremner, it was both.

Bremner is a single mom with two teenagers, and two years ago she was having trouble stretching her $10-an-hour paycheck to the end of each month.

With Christmas approaching, she decided to go to the Bellingham MoneyTree outlet because she had seen the company’s advertisements on television. Whatcom County has more than 20 registered no fax cash loan operations.

She borrowed a couple hundred bucks using a check postdated for two weeks out, her next payday. It seemed a lot easier than hitting up relatives or friends for money.

But when payday rolled around, Bremner was still short of cash.

“The next time, you get a larger loan to cover the last loan, and it just takes off from there,” Bremner said. “You really don’t pay attention to how much the interest rate is. All you’re thinking of is getting fast money so your power doesn’t get shut off and things like that.”

The cycle went on for nearly two years. Bremner eventually was getting payday loans from four different companies, her loans totaled $1,600, and her interest payments added up to more than $400 a month. She went to her church, Christ the King, for help, and was referred to Darlene Moore, a volunteer with Love INC., which stands for “Love In the Name of Christ.”

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Darrin Andersen, President of the Community Financial Services Association, recently wrote in to The Daily Press. Here’s a summary of what he said:

The Dec. 1 article on payday loans lacked any perspective on costs to consumers (”Payday loans trap families, report says”). The article noted that consumers annually pay $4.2 billion in payday lending fees, but forgot to mention that consumers receive $40 billion in credit for those fees.

According to the Center for Responsible Lending, faxless payday advance loans should be banned because they cost consumers money. Consumers also spend $42 billion a year on books even though books are available free at the local library.

So, why not ban the sale of books?

Let’s put it in perspective. In 2006, consumers will also spend $4.2 billion in ATM service charges to withdraw their own money. They will pay an estimated $22 billion in insufficient funds fees to banks and credit unions and banks will collect an estimated $10.3 billion for overdraft protection services.

Businesses will charge an estimated $57 billion in late bill payment fees (more than 140 percent of the total estimated payday lending volume in the United States). And credit card interest will cost consumers more than $87 billion.

We have worked with policymakers in 38 states to support responsible regulation that protects consumers and their access to credit. In a state-regulated environment, an instant cash loan can often be the best choice for consumers.

Elimination of regulated storefront payday lending will only drive consumers to unregulated offshore Internet lenders or force them to choose between more expensive alternatives such as bounced check, overdraft protection, or late bill payment fees.

Unlike the Center for Responsible Lending, which is opposed to virtually every consumer choice when it comes to short-term credit and/or cash loans, we believe consumers are very capable of making decisions without self-appointed guardians telling them what financial products they can, and cannot, use.

The bottom line is that consumers spend $4.2 billion a year for a product they choose over the alternatives.

Two months after Congress approved a cap on loan interest rates for service members, lawmakers are urging financial institutions to look for ways to make affordable small cash advance loans available to all consumers, not just the military community.

Rep. Barney Frank, D-Mass., incoming chairman of the House Financial Services Committee, said Wednesday that payday loans and other high-cost loans affect many Americans, particularly those with low incomes. Frank spoke at a conference hosted by the Federal Deposit Insurance Corporation to review options for affordable, responsible loans for the military community.

Congress recently passed a law limiting interest rates to 36 percent on faxless payday loans and other consumer loans made to military personnel and their families.

Such loans have been a persistent source of financial problems in the military community, especially among junior troops who may have to roll the loans over when they are unable to repay on time - at annual interest rates of 400 percent or more.

The FDIC convened the conference to address the “pervasive need for more responsibly priced small-dollar loans,” said Sheila Bair, chairman of the FDIC

Frank said he intends to work with Bair and others “to go beyond the military community and reach out to others” to address the issue of high-cost payday cash advances.

Low-income customers go to payday advance loan lenders and similar establishments rather than traditional banks or credit unions for a variety of reasons. The banking system, as it stands now, is “underutilized by the lowest-income people in our country,” Frank said.

But banks are not the problem, he said.

“It’s the lack of sophistication, and fear that keeps people out. Here’s a chance for people in the banking system to dispel some unfair myths.”

The model for providing some affordable loan alternatives for military families could be used to extend banking services to all lower-income people, he said.

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