The D.C. Council on Tuesday voted to sharply limit the practice of payday loans in the District.

Officials said the loans target poor and lower-income workers who can be stuck with interest rates as high a 300 percent if the loans are not paid back quickly.

Officials said that often borrowers are unable to repay their payday cash advances and must fork over additional fees. Typically, D.C. residents pay over $700 just to borrow $325.

The new measure would restrict interest rates and penalties on such loans and require more disclosure to borrowers.

The D.C. Council must vote on the legislation again this fall before it can go into effect.

Officials said that since 1998, the District has given faxless payday loan lenders special treatment - no other lender can charge more than 24 percent interest for a consumer loan.

Twelve states have eliminated payday loans, including Maryland. In North Carolina, most low-income residents said eliminating payday loans either was a good thing or had no impact on their lives.

A national, faxless payday advance lending group announced Monday it is hiring a former Democratic gubernatorial candidate to be its executive vice president.

Community Financial Services Association of America is bringing in Tommy Moore (pictured), who resigned from his Aiken County senate seat this weekend, to lobby and do public relations for the payday lending industry. The businesses provide loans of hundreds of dollars for several weeks at high interest rates.

The industry has been sharply criticized recently by people who said it takes advantage of poorer consumers and the high interest rates send them into a spiraling crush of debt. But no fax payday loan lenders have said the businesses provide a vital service and consumers pay more in fees in the long run when they bounce checks while trying to pay the bills.

“At this point in my career, I saw an exciting opportunity to take on a new challenge that builds on my long history of supporting and protecting consumers,” Moore said in a news release issued by the group.

Initially on Monday, Moore would not talk about his new job. He did not immediately respond to a message left on his cell phone after the announcement was made.

Association spokesman Steven Schlein would not disclose how much Moore would be paid. The fast cash advance group paid its executive director $132,749 plus an undisclosed sum included in a $1.2 million “management fee” in 2005, the most recent year available from Guidestar, nonprofit research group.

Moore was the Democrats’ candidate for governor, receiving less than 45 percent of the vote in 2006. He had been in the state Senate since 1981.

During last year’s gubernatorial campaign, Moore received at least $7,000 in donations from the payday and car title loan industry.

“We’re deeply disappointed he would take a job like this. These are bad guys, and they do shameful things,” said John Ruoff, research director for the advocacy group S.C. Fair Share.

A bad credit cash loan lending bill will be waiting when the Senate returns in January. Moore didn’t appear to push from either side last session, but that will likely change with his new job, Ruoff said.

Scores of Oregon payday and car title lenders have closed their doors, as a 36 percent interest rate cap on regular and faxless payday loans and other new regulations took effect last week.

Gone are the 520 percent annual interest rates that were common among payday lenders before the Legislature recently passed new regulations. Gone, too, are many of the lenders. But among those who remain, borrowers will find their small, short-term loans cost about a third of what they cost before.

At least 60 no faxing payday loan stores have closed or surrendered their licenses since June 1, says Charles Donald, supervising examiner at the state Department of Consumer and Business Services.

Luanne Stoltz left a 20-year career as a high school math and science teacher years ago to open two payday stores in Portland. She has closed them both and says she doesn’t know what she will do next. “I’m out of business,” she said.

Check ‘n Go Inc., a payday advance loan lender based in Mason, Ohio, will close its 21 Oregon stores because of the new regulations, a spokesman said. Advance America, Cash Advance of Spartanburg, S.C., the nation’s largest payday loan company, is evaluating whether it can keep its 45 Oregon stores open, said Jamie Fulmer, director of investor relations for the company, which operates in 37 states.

“The economic situation that exists in Oregon currently is one that we think is prohibitive,” Fulmer said.

Northwestern Title Co., based near Atlanta, has stopped making car title loans in its 17 Oregon stores, which it is preparing to close, said Ken Wayco, president. Car title loans are similar to payday loans except they use car titles rather than the borrower’s next paycheck as collateral.

Northwestern recently filed a lawsuit in Marion County Circuit Court challenging the constitutionality of the new law that caps interest at 36 percent for all consumer loans.

“Unless we prevail in the suit there, we’re all out of business,” Wayco said.

Still, more than 200 personal cash loan lenders are doing business, at least for now, under the Legislature’s new regulations.

“It looks like some businesses are able to provide more affordable loans, and that sounds like a real win for the community and consumers,” said Patty Wentz, spokeswoman for Our Oregon, a nonprofit progressive coalition that led the fight for laws regulating payday and car title lenders.

The new laws allow pay day loan and car title lenders to charge an origination fee of $10 per $100 loaned, though no more than $30 for a loan of any amount. Loans must be for at least 31 days. Lenders can charge 36 percent annual interest, or about $3 per $100 in addition to the origination fee.

That means lenders can charge a total of $13 per $100, which amounts to an annual interest rate of about 154 percent for a 31-day loan.

Click here to read the rest of this article from The Oregonian…

The following is an editorial from The Viriginia Times-Dispatch, focusing on the state’s payday loan lending fight:

The fight over payday lending is like pulp fiction: There’s a tawdry story line. Profit bests principle. A tough guy is anything but.

• In March, barely a month after the legislature quits, lobbyists for payday advance lenders herd into a Richmond law office to tell their clients to steel for the next phase of a brawl that already has cost them a ton in legal fees, crummy press and campaign contributions.
• In May, a Peninsula businessman, who has bailed out employees swamped by debts to payday lenders, teams up with two retired U.S. Treasury guys to launch the latest group committed to shuttering the nearly 800 money stores here.
• About the same time, the State Corporation Commission –of which a former judge, Clint Miller, has signed on as a lobbyist for payday lenders’ crude kin, car-title lenders - reports that instant payday loan lenders are handing over more cash to fewer borrowers and filing more lawsuits against alleged deadbeats.

In other words, people who might not qualify for credit in the first place are discovering a second, costlier way to stick it to themselves: getting sued.

• In June, pro’s and anti’s cross paths at big-dollar fundraisers for General Assembly Republicans and Democrats. The pro’s - perhaps because they didn’t think to do it - are still steamed over cash advance payday loan ads the anti’s ran in the program for the Dems’ event.

• And last week, Gov. Tim Kaine renews his call for a crackdown on the high-cost, instant personal loan industry, blowing the cover on one of the worst-kept secrets in town: that both sides are warily talking about a possible deal, brokered by Kaine aide Mark Rubin.

This can’t be good news for foes of payday lending. They want to put it out of business or put it on a leash. Read: Restrict sky’s-the-limit interest rates to 36 percent. Kaine isn’t committing to either.

His nuanced pronouncement may mean that Kaine, distaste for subprime-ates notwithstanding, doesn’t want this issue threatening his legacy-building agenda in the 2008 legislature.

The industry is worried, too. It wants an agreement because the General Assembly could change after November. The votes to keep providers of cheap payday loans alive are concentrated in areas where, because of population or prosperity, there are few cash shops.

Such indemnification won’t last forever; a deal is a better than another black eye. Or another. Or another.

When Kaine weighed in on payday lending during the 2007 assembly, it was a move by a fellow Democrat, Senate Minority Leader Dick Saslaw, that dashed substantive restrictions for the year.

Saslaw, who as his party’s Senate boss can make Kaine’s life lousy or lovely, yanked an industry-written “reform” bill. In doing the bidding of payday loan lenders, Saslaw stopped Kaine from doing a number on them.

Without a bill - credit the lenders’ skilled lead lobbyist, Reggie Jones, who also represents their potential competitors, credit unions - Kaine was helpless to force a vote on what he’d led many to believe was a non-negotiable demand: a 36 percent interest-rate cap.

The cash loan online lenders say that’s a deal-breaker; that it would drive them out of business by slashing rates to pennies on the dollar.

Since when is it the legislature’s job to guarantee a profit for any business, other than maybe regulated public-service corporations such as electric utilities?

Simpsonville is considering restrictions on sites for fast payday loan lenders, title loans and check cashing stores.

The planning commission is rewriting an ordinance that restricts new lenders in the city.

The commission discussed the cash loan ordinance July 5 and could vote whether to recommend it to the City Council at its scheduled Aug. 7 meeting.

The ordinance would allow lenders to open new stores in service districts but bans them from commercial areas except by special exemption from the board of zoning appeals

Simpsonville has eight no fax payday advance lending stores now that would be grandfathered into the ordinance.

If a lender goes out of business, the property owner would have one year to fill that space with another lending store or the grandfather clause expires.

In April, the council passed a 90-day moratorium on new business licenses to payday loan lenders. That moratorium ends July 16.

Federal regulators are pushing banks to offer cash-strapped Americans an alternative to high-interest, no faxing payday loans.

The Federal Deposit Insurance Corp. recently issued guidelines to help banks develop small loans that are significantly less expensive and have more consumer-friendly terms than payday loans.

The bank version would have a maximum annual interest rate of 36 percent and have low or no fees.

The FDIC also is asking banks to divert a portion of the revenue they make from each cash advance loan into a savings account for the borrower, and to offer financial counseling to repeat borrowers who might require help learning to manage their day-to-day finances.

In return, banks would receive positive marks under the Community Reinvestment Act, which requires banks to offer banking services to low- and moderate-income neighborhoods. Regulators use this data when deciding whether to approve bank mergers and acquisitions.

But banks are not rushing to offer the loans, saying they just aren’t profitable.

“Low-dollar-denomination loans are very expensive to make and because they are uncollateralized, they are very risky,” said Mike Van Buskirk, president of the Ohio Bankers League. “Banks will be cautious.”

Of the major Ohio banks, only Key Bank has introduced such a small payday loan. As part of a test program in several low-income Cleveland neighborhoods, Key provides a cash reserve line of credit of about $250. Customers can use it as “overdraft protection, which could be paid off over time, just like a credit card,” spokesman Mike Sherman said.

Ohio credit unions have been faster to draft low-dollar loans. The Ohio Credit Union League introduced an alternative to payday loans, called StretchPay, in June 2006.

StretchPay loans have an annual percentage rate of 18 percent and must be repaid within 30 days. Borrowers also pay an annual fee of $35 for a $250 loan limit or $70 for a $500 loan limit. The annual fee goes into a fund to help credit unions that suffer excessive losses on the loans.

Kemba Financial Credit Union and MidState Educators Credit Union in Columbus are two of about 30 Ohio credit unions offering the loan.

“We don’t want to be in the payday loan business, but we have an obligation to consumers to offer an alternative to 400 percent interest rates,” said Becky Hart, spokeswoman for the Ohio Credit Union League.

Fast payday advance lenders charge about $15 for every $100 borrowed. The annual percentage rate on the average payday loan is 391 percent, according to the Community Financial Services Association of America.

Payday lenders earned $6 billion in fee revenue from $40 billion in loans in 2003, according to Stephens Inc., a Little Rock, Ark.-based investment bank.

Read the rest of this entry »

Governor Timothy M. Kaine (pictured) renewed his call for tighter controls on the controversial payday cash advance lending industry Tuesday, but he stopped short of supporting specific reforms.

Speaking at a ceremony to mark the passage of tax-relief legislation, Kaine said the state must do more to help the working poor. The Daily Press had the story.

To that end, he said he would either propose or support additional restrictions on payday loan lenders.

“I just really have it on my heart that people shouldn’t take advantage of people who are poor,” he said.

Earlier this year, lawmakers, industry representatives and consumer advocates could not agree on a reform bill aimed at the short-term, high-interest bad credit payday loans.

A payday loan costs $15 for every $100 borrowed. The maximum loan amount is $500, and the typical term is one or two weeks. If renewed for a year, as is done in some cases, interest rates hit 390 percent.

Industry leaders say payday loans offer quick cash to people who need it in an emergency. While they admit that some people misuse the service, they say most of their customers exercise restraint.

Critics say faxless payday loans trap people into a cycle of debt.

They also accuse the industry of preying on the working poor. One measure backed by opponents would have capped interest rates at an annual rate of 36 percent. Payday lenders say they are willing to discuss changes to the rules, but a 36 percent cap would effectively force them out of business.

On Tuesday, one organization that has railed against the fast cash loans said it would continue to push for the 36 percent limit.

“Thirty-six percent is the middle ground,” said Ann Rasmussen, policy director of the Virginia Interfaith Center for Public Policy.

However, Kaine said he did not think a 36 percent cap would get through the legislature. Instead, he wants to forge a different compromise.

Likewise, one lawmaker who led the fight for reform said she wanted to find middle ground, perhaps by limiting the number of cash advance loans per year, plus other measures.

“The ultimate goal is to break the repeat borrower cycle,” said Del. Jennifer McClellan, D-Richmond.

Diane Robles, a recently divorced mom, was working as a secretary and going back to school when she borrowed $100 from a payday advance loan lender to make a mortgage payment, a decision that eventually cost her upward of $15,000 in lending fees.

Now a critic of the payday lending industry, Robles said she supports an initiative campaign announced last week that would ask voters in 2008 to put the quick-cash stores out of business.

People such as Rebecca Tuck-White, though, appreciate being able to borrow cash from quick cash loan lenders instead of relying on family members.

Tuck-White was pregnant in 2004 and had put money down on a new home, so she didn’t have cash on hand when her car’s transmission broke. She used a payday loan the way stores advertise them.

“It was literally to bridge the gap,” she said of her $500 loan, which she paid off in two weeks with a $75 fee.

“I don’t think it’s any worse than gambling. There are other social ills out there that could use more attention than the payday loan industry is getting,” said Tuck-White, 31, of Queen Creek.

Still, state Rep. Marian McClure, R-Tucson, who is leading the initiative campaign, said that no fax payday loans ruin lives like drugs ruin lives, which is why government needs laws to outlaw both.

Ending payday loans
McClure wants to outlaw the foundation for payday lenders’ business. She does not want a business to take a post-dated check in exchange for cash today.

For example, a customer who needs $100 immediately writes a check to a bad credit payday loan company for $115. The company gives the customer money and then cashes the check on the customer’s next payday, when the customer presumably will have enough money to cover the check.

If payday lenders were forced out of business, customers would have to find other places to turn for quick cash.

Nancy Lopez of Glendale, who appreciates the payday lenders’ services, took out a loan recently when her cats got sick and the vet bills came. If she could no longer turn to payday loans, she said she would have to go to a pawnshop.

“There’s no other place where you can go and get a small loan anymore unless you go to a pawnshop and put up your heirlooms,” said Lopez, 55 “It serves a niche.”

Once, she said, she had to borrow money from her niece, “which was one of the most humiliating things I’ve ever had to do in my life.”

“What’s more embarrassing?” she asked. “You don’t want to ask your friends for money, and what employers can afford to give money these days?”

Also, Lopez said she prefers cash advances to credit cards because the cards’ late fees and over-limit fees add up quickly.

“You always know exactly what you owe” with payday loans, said Lopez, who works as a customer service representative. “You don’t have any hidden charges. I know I owe exactly $230. No more and no less.”

If payday loans hadn’t existed when Tuck-White’s car broke down, she said she probably would have had to turn to her family, but she wouldn’t have wanted her family to worry.

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The following is a Letter to the Editor of the Virginia Daily-Press…

Reference “Let’s develop alternatives to payday loans,” June 23, by Ward Scull and Mike Lane. Far from “trapping” customers, payday advance companies each year help thousands of Virginia families overcome unexpected financial circumstances.

When an air conditioner breaks or a car battery dies, payday lenders provide convenient access to small amounts of money to cover those costs. Banks don’t - they instead make billions on bounced checks, “overdraft protection” and other fees. Faxless payday loan customers wisely avoid these more costly alternatives.

While critics, including Scull and Lane, have rushed to label payday lending as “predatory” without ever having defined what “predatory” means, recent studies show that by extending credit where there would otherwise be none, payday loans are not predatory but instead actually help the households they serve.

Further regulation of personal cash loan lending has the adverse and unintended consequence of reducing credit options for those who may have few alternatives.

Policymakers should encourage competition in the small loan market as competition controls prices. The vast majority of payday loan customers pay their loans back on time. For the small minority of customers who find difficulty meeting their loan terms, responsible lenders offer extended payment plans that provide more time to repay their loans at no extra cost.

Let’s give reasonable, hard-working Virginia consumers access to a variety of regulated credit options and trust them to make financial decisions based on what’s best for their families.

Tom Weilandt
Chesapeake

The Oregon Senate Monday approved new limits and restrictions on high interest-rate lenders. The legislation was inspired by critics of payday loans who loan money for a short time at exhorbitant interest rates.

The bill passed Monday is the second half of a consumer lending protection package which is quickly moving toward final approval. It extends consumer protection laws to companies offering high-interest personal loans to Oregon consumers through the mail, the Internet, or over the telephone.

Passage of the bill follows Senate passage on Friday of a bill that limits the interest rate on title loans to 36% per year.

The new rules also create a database to track title and payday advance loans, and prohibits debt collection by a lender unless they have a state license. There are also limits on fees for dishonored checks.

The House of Representatives originated both bills, and already passed them.

However, because the Senate made some changes, they now go back to the house for reconciliation of the Senate and House versions. That reconciliation is considered likely to happen, and so is approval by Governor Ted Kulongoski, who has been a prime supporter of both fast cash loan ordinances.