According to The Birmingham News, Alabama residents last year paid $225 million in extra fees for small, short-term payday loans, the fifth highest amount in the country, based on a report released Thursday by a consumer advocacy group that opposes predatory lending practices.

Center for Responsible Lending found American families last year paid $4.2 billion in fees on such loans. The loans typically charge a minimum fee of $15 or more per $100 borrowed with a full repayment of the borrowed amount due in two weeks.

Payday cash advances, basically two-week cash advances on paychecks with fees up to 17.5 percent in Alabama, have the equivalent of an annual interest rate of more than 400 percent and usually are rolled over several times instead of being paid back quickly.

The typical borrower pays back $793 for a $325 loan.

Opponents argue such terms prey on those who can least afford them; advocates say no fax needed payday loans fulfill a legitimate need for people who need emergency cash.

“We think payday lending is a defective product,” said Jean Ann Fox, consumer protection director at the Consumer Federation of America. “They are based on enticing customers to write checks when they don’t have money in the bank to cover them.”

The report estimated that 90 percent of payday loans nationwide go to borrowers with five or more such loans each year, and the $225 million in “excessive” fees in Alabama represented 90 percent of the total no fax payday loan fees collected in the state.

Alabama and 38 other states allow payday loans. Eleven states have clamped down on the industry, such as capping interest rates at 36 percent. Congress this year put just such a cap on payday loans to military families.

In Alabama, 1,201 cash loan stores lent more than $1.4 billion last year.

Julian Bond, chairman of the NAACP, said the civil rights organization opposes the practice because it tends to prey on low-income minorities.

“There’s a market for all kinds of products, financial and not, and when those products are proven harmful to the public consciousness, the states have stepped in to bar or prohibit them,” Bond said.

The payday loan industry took issue with the report, arguing that its credit products are a reasonable alternative for people who need cash quickly and that most of their customers are employed, responsible people who pay off their cash advances on time.

“Contrary to the (Center for Responsible Lending’s) spin, responsible uses of the payday product provides consumers firm footing to overcome unexpected financial circumstances,” said Ken Compton, CEO of Advance America.

A financial conference this Saturday aims not to draw people with plenty of money to invest, but low- and moderate-income people who could use a hand with faxless payday loans and other aspects of their finances.

The Madison-based, nonprofit Asset Builders of America will sponsor the second annual Money Conference in Gateway Technical College’s Racine building. The group’s mission is to design and implement wealth-building strategies for low- and moderate-income youths, families and communities.

In other words, reports The Journal Times, it’s aimed at the people who need the most help and have the fewest resources.

“There’s no selling, and no one will try to sign you up for accounts,” said Richard Entenmann of Asset Builders. “It’s just an educational program.”

However, the Money Conference will benefit from the presence of representatives of financial institutions. Part of the hope, Entenmann said, is that participants will meet those people and feel more comfortable about going to them - perhaps instead of cash advance lenders - later if they decide to use their services.

Just as the conference is geared toward those who are least-savvy about money, that target audience is also difficult to draw.

“The hardest part of this program anywhere is to get people there,” Entenmann said.

Asset Builders - which so far operates just in Wisconsin - was founded by Bob Wynn. Before opening his own consulting business, Wynn was the financial education officer for the Wisconsin Department of Financial Institutions.

From 1985-1996 he was the director of minority business development in the Wisconsin Department of Commerce. During that time he created the Early Planning Grant Program and the Minority Business Development Fund which has provided more than $5 million in financing to minority-owned firms.

The Money Conference, which started 6 years ago in Milwaukee, is built around the premise that everyone can build their own future. It is structured to accommodate entire families, hoping to move them away, or at least educate them on, resources such as online payday advance loans.

“We’re making it family-friendly for families to be there and to be fun for kids - and hope they learn something at the same time,” Entenmann said.

Child care is offered - but only through age 5. For children 6 and older, Junior Achievement will offer hands-on, interactive sessions designed to teach children about handling money.

Participants will choose which sessions most interest them. There are more than 20 sessions in all, three of them in Spanish.

Regular, one-hour sessions will include these topics: home ownership; reverse mortgages for senior citizens; credit reports and scores; vehicle financing options; identity theft; starting a business; how to buy food economically and prepare nutritious meals; and one called “Payday Loans - You Can Do Better.”

All participants will be able to take a look at their own credit report if they ask for it. Then they can meet with someone one on one for help with interpreting the report, Entenmann said.

In light of the recent report that payday advances cost Americans billions each year, those in the Fredericksburg area are taking another look at such resources in their city.

According to The Free Lance-Star, the payday loan offices are located throughout main thoroughfares. Among those hit hard by the loan roller-overs are service members.

Earlier this year, officials at Quantico Marine Corps Base told of a Marine who rolled over a loan so often it grew to $14,000 in 18 months.

The CRL’s study showed that 90 percent of quick cash loans go to people who take out five or more such loans a year, while 60 percent of loans go to those who take out 12 or more a year.

“Payday loans do indeed sink borrowers in debt that can be as difficult to escape as quicksand,” said CRL President Michael Calhoun, during a telephone news conference outlining the report. “These repeat borrowers are far worse off for having taken out a payday loan. They end up paying back far more in interest than they originally borrowed.”

Virginia began allowing regular and faxless payday advance lending in 2002, and in short order hundreds of payday loan businesses sprung up around the state. According to the report, as of 2005 there were 756 payday loan stores in Virginia.

Borrowers had an average loan of $355, on which they paid an average fee of 14.8 percent - or 386 percent if averaged out over a year.

The high interest pushes people who are already having trouble making ends meet to take out a second loan to pay the first. Many fall into a cycle, taking out numerous loans just to pay the accumulating interest.

Various studies have also shown online payday loan companies target low-income people - many clustered around military bases - until laws were passed limiting the amount of interest payday loan companies can charge to members of the military.

Now, payday loan companies can charge military members only 36 percent interest.

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A report in USA Today says one of the nation’s top banking regulators has announced new efforts to develop alternatives to payday loans and other high-cost products, citing an “astonishing” gap in the cost of credit that is penalizing disadvantaged borrowers.

The comments came as a non-profit consumer group issued a report saying high fees on so-called payday cash loans, small loans to be repaid with their next paychecks, cost consumers $4.2 billion a year.

The report by the Center for Responsible Lending found an average payday borrower paid $793 for a $325 loan. Further, it said that 90% of payday revenue came from borrowers who were unable to pay the balance and fees by the due date, forcing them to repeatedly roll over the loans.

Annual fees on faxless online payday loans can run from about 300% to 1,000%. There are about 22,000 U.S. payday outlets.

“It almost seems as if the market has become divided between two groups: those who successfully rely on banks for virtually cost-free basic financial services and those who pay high amounts,” Federal Deposit Insurance Corp. Chair Sheila Bair told the Consumer Federation of America in a speech.

“The fortunate accumulate wealth through cost-free savings vehicles. … Others pay set-up and maintenance fees for small-dollar savings accounts which erode principal,” she said.

Bair said the FDIC is working with the Association of Military Banks of America and more than 125 banks near military bases to develop cost-effective, small-dollar no fax cash advance loans that will possibly include a savings component.

The FDIC will hold a conference with the banks on Wednesday.

In addition, the FDIC will issue draft guidelines Monday giving banks credit toward meeting federal community lending requirements if they offer reasonably priced, small loans. Many credit unions are already offering payday alternatives. The North Carolina State Employees’ Credit Union offers a 12% annual interest rate and savings incentives.

Bair’s speech is the latest in a series of efforts to combat the rapid proliferation of alternative lenders. A new federal law will impose a 36% annual interest cap on payday loans to the military. States are setting tighter standards on mortgage and faxless payday loan lending.

Michael Calhoun, president of the Center for Responsible Lending, says an interest rate cap is the best approach. He says consumers are vulnerable during holidays.

“Many say they took out a payday loan to buy some extra presents,” he says.

Bair will examine whether federal rules create perverse incentives for banks to favor high-cost products and whether consumer laws are outdated, written when there was too little credit for minority and low-income borrowers, not too many costly loans.

QC Holdings, Inc., one of the larger payday advance loan companies in the country, announced the acquisition of 51 South Carolina-based Express Check Advance, LLC payday loan branches.

The deal cost approximately $16.2 million in cash and is effective as of the open of business today.

“This acquisition expands our company with minimal distraction to existing operations and instantly gives us significant market share in South Carolina,” said QC President and Chief Operating Officer Darrin Andersen. “These branches are generating meaningful cash flow and will be accretive to our earnings per share in 2007.”

Revenue from the 51 instant cash loan branches during the last 12 months ending on October 31, 2006 totaled approximately $11.3 million and branch-level gross profit during the same period totaled approximately $2.7 million.

Aggregate current cash advance loans receivable were approximately $5.4 million as of October 31, 2006.

The acquisition, which was funded through QC’s credit facility, raises QC’s total branch count to 611 branches and strengthens its national footprint by establishing a significant presence in South Carolina, where QC already operates 11 payday loan branches.

A report released this weeks says the use of cash loans cost Californians an estimated $365 million in 2005, more than any other state.

The industry derived 90 percent of its 2005 revenue from “trapped borrowers,” those who took out five or more loans that year, the Center for Responsible Lending said.

In California, payday borrowers took out an average of six same day payday loans.

“In spite of increased scrutiny and attempts to reform the payday industry, the industry and payday lending today remains a business dependent on keeping borrowers caught in a debt trap,” said Michael Calhoun, president of the Durham, N.C.-based Center for Responsible Lending.

The Mercury News had the report.

No credit check payday loan lenders, often combined with check-cashing operations, provide immediate cash for a high fee. In a typical example, a borrower will write a payday outlet a personal check for $300 and receive $255 on the spot. After their next scheduled paycheck, anywhere from a day to two weeks later, the outlet cashes the check and pockets the $45 difference.

California law caps such loans at $300 and their fees at 15 percent. That works out to a 390 percent annualized interest rate, assuming a two-week loan.

The Community Financial Services Association, a Washington, D.C.-based trade group for the payday industry, says these personal loans are critical tools for people with short-term credit needs. It characterized the CRL study as “misleading.”

“This rehash of flawed statistics is designed for publicity purposes, not a serious discussion of consumer lending needs,” said Darrin Andersen, CFSA president, in a prepared statement.

He did not dispute the $4.2 billion figure, saying: “The bottom line is that consumers spend $4.2 billion a year for a product they choose over the alternatives.”

The CFSA response did insist that the industry doesn’t encourage extensions of loans, noting they’re illegal in 37 states. But the CLR study did not refer to extensions, sometimes called a cash advance payday loan rollover, but “flipping,” paying off an initial loan and subsequently taking out a second.

Just how much of a profit do faxless payday advance companies make?

Lenders pocket $4.2 billion in excessive fees each year from Americans who seek a two-week loan and end up trapped in debt, according to a new report released today by the Center for Responsible Lending.

The study calculates the cost of predatory payday lending state-by-state and also estimates that borrowers save $1.4 billion in states that enforce reasonable interest rate caps.

“Payday loans sink borrowers into quicksand-like debt,” said Michael D. Calhoun, CRL president. “Borrowers end up paying more in interest - at rates of 400 percent - than the amount they originally borrowed. But by addressing payday lending squarely with a 36-percent APR cap, state lawmakers can get working Americans back on solid financial ground.”

The fight against payday loans: Julian Bond, chairman of the NAACP said his organization is committed to fighting abusive financial practices such as payday cash loan lending.

“This is hard-earned cash being siphoned out of the wallets of working people,” said Bond. “This $4.2 billion is much-needed monthly benefits being squeezed out of the pocketbooks of retired and disabled folks. This $4.2 billion should be helping people stay firmly put in the middle class, rather than keeping them trapped in the quicksand of poverty.”

Such payday cash advances are marketed as short-term cash advances on the borrower’s next paycheck. But previous research has found - and this study confirms - the industry depends on repeat business or “flipped” loans.

In fact, 90 cents of every dollar payday lenders make comes from Americans caught in the debt trap –those borrowers who are flipped into loan renewals five or more times per year. The new report finds the average payday borrower pays back $793 for a $325 loan.

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The heyday of the payday loan company may be about to end in Battle Creek.

By April, organizers expect to open the Inspire Community Federal Credit Union, created to help low- to middle-income area residents avoid the financial minefields of predatory lenders.

The planned credit union has leased space at 80 W. Michigan Ave., Suite B, next to the Old Tyme Bakery at the base of a city parking garage, and is working on getting federal regulatory approval to open.

“This is going to create real change that will really make a difference in people’s lives,” said Charles Rose, a member of the credit union- steering committee.

“I think that if you take a look at a lot of the efforts that are going on, some of them, two years from now, will say, ‘Hey, it was nice that we did that,’” said Rose, also neighborhood economic development administrator for the Battle Creek neighborhood services department. “But this credit union will stay. It will be affecting generations of people in this city.”

Eric Tobin, the project coordinator, noted that this is a community development credit union, created to provide an alternative to the expensive choices that low-income people often find themselves having to make in tough times; i.e. cash loans.

Among the first offerings will be short-term loans that will make a lot more financial sense than using a providers of savings account payday loans, which charge annual interest rates of more than 400 percent, Tobin said Tuesday.

Also available will be two-year installment loans as an attractive alternative to acquiring goods through rent-to-own dealers, Tobin said.

“Somebody needs to fill that gap, and somebody needs to do that without taking advantage of them,” he said.

That type of lending will be coupled with referrals to local financial education programs such as those offered by Neighborhoods Inc. and Guardian Finance and Advocacy Services, Tobin said.

Guardian’s Jackie DeHaan championed the credit union idea after hearing about it at a conference about three years ago, Rose said.

In recent months, organizers have selected and trained a board of directors, picked their name and location and are revising their business plan, reports The Battle Creek Enquirer.

The organization has about $140,000 in seed money from the W.K. Kellogg Foundation, Battle Creek Community Foundation and Miller Foundation to move toward opening day.

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For the average consumer, “loans that fit in with your lifestyle” ideally would be fast and easy to get and would never require repayment, states an article in the investing section of The Chicago Tribune.

As long as the real-world lenders want their money back with interest, however, the best loan deals will never be as easy as consumers want. What’s more, any place offering fast, easy money is going to exact a price for the convenience of those online cash loans.

So when the writer saw a television ad for CashCall.com promising fast bucks to fit the consumer’s busy and stressed lifestyle, it not only seemed too good to be true, it looked like a Stupid Investment of the Week.

In most circles, taking out a bad credit payday loan does not constitute an investment, but it qualifies because it’s a commitment of money, over time, to get an expected “return,” namely the money that the borrower gets up front.

On the surface, and in the television ads, the loans look and feel a bit like payday advance loans a form of lending that typically is fairly abusive to the customer. In a payday advance situation, the lender is entering the deal based on the borrower’s paycheck, rather than the credit report.

Repayment terms are notoriously bad. The loans are designed to be paid back in a few weeks, but the annual percentage rate charged on the money often runs well into the hundreds.

CashCall clearly is a step above that level, to where its commercials might attract an average consumer with perhaps a slightly above-average consumer debt load. There is a credit check, but the documentation is light, typically amounting to a driver’s license and a voided check from an active checking account.

Rates on these cash loans: But try to find the rate and terms of the loan on the firm’s website and you are out of luck. The no fax cash loan amounts actually vary by state.

In most states, loans run from $1,075 to $5,075, though the consumer never sees the last $75 of that dough, because it goes to the lender as an “origination fee.” It not only adds to the effective interest rate you are paying, but because it is part of the loan, it also accrues interest.

Boy, does it ever.

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The Canadian Payday Loan Association (CPLA) today applauded the Manitoba government for passing payday loan legislation in the province.

In a press release, The CPLA recognized Manitoba’s role in putting their issue of industry regulation in the spotlight and urging the federal government to allow provinces to regulate a viable payday cash advance industry.

The CPLA has been actively calling on governments across the country for two years to introduce and pass effective payday loan legislation.

The federal government is currently holding hearings on Bill C-26, which
will allow provinces to regulate the cash loan industry. The Bill is
expected to be reviewed by the House of Commons Industry Committee before Christmas.

The Province of Nova Scotia recently passed its own payday loan legislation with British Columbia, Alberta, Saskatchewan and New Brunswick
having also publicly committed to quickly moving forward with similar legislation this spring.

“The Government of Manitoba was the first to recognize the need for
effective payday loan legislation that balances strong consumer protection
with a viable industry,” said Stan Keyes, President of the CPLA.
Manitoba’s Public Utility Board is expected to hold hearings in the
spring of 2007 to set permitted fees for borrowing.

“It will be important to set a cap on fees that allows for a competitive,
viable industry while ensuring consumer protection. We need to shut down the bad apples and let the committed, responsible [quick cash advance] lenders provide this needed financial service at reasonable rates, ” added Keyes.