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Posts Tagged ‘payday loan’

Lawmakers need to enact legislation to regulate the booming payday loan business in Texas. Payday and auto title lenders in Texas are not subject to rules and regulations that apply to banks and other conventional lenders.

A major loophole in the law allows them to operate as credit service organizations, which requires only a $100 annual registration fee. That leaves them free to operate without interest rate limitations or oversight.

The payday loan business has been steadily growing since the late 1990s when their business practices first attracted the attention of the state attorney general. There are now more than 3,000 payday and auto title businesses in Texas; two-thirds of them started doing business within the last four years.

The targeted customers for such businesses are cash-strapped individuals living paycheck to paycheck. They offer small, short-term advances on future wages or on a car title, often with a hefty upfront fee.

It is not unusual for a borrower to pay a $25 fee on a $100 loan due in 10 to 14 days. A condition of the loan is that the borrower gives the lender a postdated check for the amount due. If the borrower has no cash in the bank when the payment is due, the lender will offer another loan and charge another fee.

If the borrower does not pay up, the postdated check is deposited and the lender tacks on a $100 insufficient fund charge and a $50 late fee. Suddenly, the borrower is in a vicious cycle of debt.

While there is a 36 percent rate cap for military payday and auto title loans, there is no cap for these loans to other borrowers.

In recent years, several states have passed laws restricting or banning payday loans. In Texas, such attempts have never gone far in previous legislative sessions and no bill has ever managed to make it out of committee.

Lawmakers with a vested interest in these types of businesses need to set aside their personal agendas and allow such businesses to be regulated.

Cities and counties are doing what they can to stop the expansion of these predatory businesses, but it is hardly enough. San Antonio and Brownsville are among several cities in the state that have approved zoning measures that prevent payday lenders from expanding without a special permit.

The San Antonio City Council and Bexar County Commissioners Court have joined colleagues across the state in adopting resolutions urging lawmakers to close loopholes that allow these businesses to operate without regulation.

The state cannot continue to ignore thinly disguised usury.

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The state Department of Financial Institutions said Friday it had issued a temporary cease and desist order against Checkmania, which does business as Checkmate, and a related Internet company, Checkmate Express, which have about 20 Washington branches. DFI ordered Checkmate to immediately stop offering a new retail installment loan program to state residents, and to immediately stop making loans to Washington borrowers that exceed statutory loan limits.

State officials alleged that California-based Checkmate promoted loans for borrowers to purchase $100 gift cards from select retailers, charging an annual percentage rate of up to 391 percent for a 15-day loan. The loans were due on the borrowers next payday, and were marketed to borrowers to whom Checkmate was not permitted to make another payday loan because the borrower had reached their eight-loan limit, officials said.

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JACKSON, MS (WLBT) – State lawmakers approve two bills that allow payday lenders to continue operating and reduce rates for consumers.

The senate version would give consumers up to 21 days to repay loans of up to $300 and a minimum of 28 days to repay loans between $301 to $500. The version passed in the house gives borrowers 21 days to payback loans up to $200 dollars and 28 days for loans of $201 to $500.

The two chambers must agree on a single version before a bill is sent to the governor. Currently a check cashing business can write a contract from one to 30 days.

We do applaud the efforts of the senators who were trying to make those improvements. We think those things are very necessary in order to make this industry better for the people in the state of Mississippi, said Paheadra Robinson with MS Center For Justice.

Weve had to face the repealer three times and unfortunately that brings it back up, and then you have the special interest groups who come in and we have to give our side of the story too, added spokesman for Borrow Smart Mississippi, Dan Robinson.

Senate Banking Chairman Gary Jackson says requiring a 28-day minimum on larger loans would effectively cut the annual percentage rate in half.

Copyright 2011 WLBT. All rights reserved.

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The state Department of Financial Institutions said Friday it had issued a temporary cease and desist order against Checkmania, which does business as Checkmate, and a related Internet company, Checkmate Express, which have about 20 Washington branches. DFI ordered Checkmate to immediately stop offering a new retail installment loan program to state residents, and to immediately stop making loans to Washington borrowers that exceed statutory loan limits.

State officials alleged that California-based Checkmate promoted loans for borrowers to purchase $100 gift cards from select retailers, charging an annual percentage rate of up to 391 percent for a 15-day loan. The loans were due on the borrowers next payday, and were marketed to borrowers to whom Checkmate was not permitted to make another payday loan because the borrower had reached their eight-loan limit, officials said.

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The State Department of Financial Institutions has ordered a pay day lender with numerous stores in our state to stop its new loan program.

Last year, the state Legislature passed a law thats supposed to protect people who use payday loans – from getting into a cycle of debt – by getting one pay day loan after another. The law says pay day lenders can only give a borrower eight loans a year.

The state claims Checkmate, which has 20 stores in the state, routinely violates that restriction.

Stop providing the kinds of loans that were arguing evade the purpose of the statute. They can keep running their pay day lending stores, but they just cannot offer this new product until we both get into court and argue theyre right or were right.

Deb Bortner, Director of Consumer Services at the Department of Financial Institutions, tells me Checkmate now offers a gift card program .. where you can convert your pay check into a gift card rather than getting cash back.

And then they can take that gift card and go to another store and get cash for that. That looks a lot like a payday loan and we believe and allege that the type of loan they are making is an attempt to evade that statute. And how much is someone paying for a $100 gift card? Theyre paying $100, but there also having to pay a fee associated with that of $15. So thats comparable if they were to take out a $100 pay day loan? Yes, its exactly the same amount.

And with this gift card purchase program, theres no limit on how many times you can do it? You can do it as many times as youll buy that $100 gift card.

And that, Bortner says, is the problem. Because if that is a pay day loan, as the state claims it is, then you should be limited to 8 gift cards a year.

Checkmate has not yet responded to the states Cease and Desist order.

I emailed the company for a comment and did not hear from anyone.

Pay day loans are always billed a short-term solution to a cash-flow problem. And for some people, it clearly is.

But the State Department of Financial Institutions says thats not always the case. About 250,000 people in Washington state took out a pay day loan in 2010. Of that group, 45,000 reached their limit of 8 loans. And Bortner says, if allowed, she believes most of those people would have taken out more loans.

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More Info: http://dfi.wa.gov/consumers/news/2011/checkmania.htm

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Dan Robinson, who owns 28 payday lending stores in Mississippi, said he prefers the Senate bill.

We will see a reduction in revenues either way, he said. The Senate version is not as bad.

He said his businesses and others are offering a service that consumers want and said the exorbitant rates attributed to them have been exaggerated.

Were way cheaper than the alternatives, he said, noting that bank overdraft charges, credit card late fees and utility reconnection fees are higher than the $20 companies charge on $100 loans.

Still, some have expressed concern over the industry.

A Clarion-Ledger series last month exposed how some Mississippians have been caught in the payday trap, spiraling further and further into debt. Some were also charged illegal fees to roll over their loans – a violation of Mississippi law.

North Carolina let its payday law sunset in 2006. Seven states and the District of Columbia have made similar changes.

Sen. Alice Harden, D-Jackson, said she thinks payday lending businesses are targeting minorities and preying on those in lower income brackets.

Holding a list of the names of businesses she spotted on her way to the Capitol Friday morning, Harden said she counted at least 15 on Ellis Avenue.

Why in the world are there so many in such a short distance? she said.

Harden said she does not think that payday lenders are good corporate citizens.

They suck the blood out of communities and never give back for any reason, she said. Its a shame the way they operate.

Dan Robinson said the payday loan outlets are most likely to be found on business corridors. Areas that have more empty buildings also are attractive because of costs.

They probably get a real good deal on the lease, he said.

He said he is insulted by the bum rap the companies get.

Several cities across Mississippi have adopted moratoriums on additional payday loan companies, including Jackson, Clinton, Starkville and Gulfport.

Others adopted resolutions requesting the Legislature take up the issue.

I know how much they give back to the communities, Dan Robinson said of payday loan companies. Our people are just like any other business out there.

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NEWPORT NEWS –

As a lifelong conservative Republican, I have always valued and promoted the free market. The free exchange between consumers and businesses with limited government intervention is the fundamental basis for the prosperity of our great nation. But I find payday and car-title lending to be a perversion of our free market and find it equally troubling for payday lenders to align themselves with these principles.

Heres why: The industrys basic business model is designed to deprive borrowers of choice, not to compete by offering a better loan product. Youll notice that these lenders cluster together offering the same loan with the same terms and the same price. Why? Because once they get a desperate Virginian in the door, they work really hard to keep him stuck in payday loan hell lending the same $300 over and over. Payday borrowers often get so desperate, they even go to the payday store next door borrowing from Peter Quick Cash to pay off Paul Loan and Pawn.

The profits from predatory lending, approximately $150 million per year, move out of Virginia faster than a payday borrower is trapped in a cycle of debt, resulting in a further loss to the economy.

Robust economic growth and job creation depend upon saving and investment. Thats why the founder of free market economics, Adam Smith, supported reasonable limits on interest rates. Every signatory to the Declaration of Independence and every member of the Constitutional Convention returned home to a state with strict rate caps on usurious loans. Our commonwealth first established a maximum interest rate of 5 percent in 1734.

Weve learned all too well what unchecked lending can mean for our economy. Abandoning the reasonable rates of our Founding Fathers for loans with an interest rate of over 300 percent APR has been a failure for the citizens of Virginia. The only beneficiaries of these predatory loans are the predatory lenders.

Saving is also the rock upon which strong families are built. Think about what a disincentive there is to save when there is far too easy access to cash. In addition to DCs spending and borrowing gluttony, weve buried ourselves in payday and car-title loans, tax loans, credit card debt and exotic mortgages, not only at the expense of long-term economic growth but also to the economic disadvantage of our children and their children.

Payday and car-title loans wouldnt exist in Virginia if not for an act of the government. Lender lobbyists and lawyers sought and won a special deal from the General Assembly a few years ago that allows them to charge usurious interest rates that are unthinkable to any reputable financial institution. Its our state legislature that has given the stamp of approval to drowning families in high-cost, easy-access debt and it is the responsibility of the General Assembly to end the practice of usury in Virginia once and for all.

In recognition of the statewide opposition to payday and car title lending, an unprecedented number of localities have petitioned the General Assembly to put an end to usury in Virginia by imposing an interest rate cap of 36 percent APR, the same rate that Congress has imposed on short-term loans to the military. The 100 towns, cities, and counties making this request of the General Assembly are witness to the devastation caused by these loans every day.

We know now through years of experience in Virginia what Adam Smith recognized centuries ago: Open markets and free enterprise are the foundation of an affluent society, but unfettered financial practices and usury are neither moral nor consistent with sound financial practices and systems.

Thats why I believe that many Virginia Republicans, like Dels. Glenn Oder, John OBannon and Harvey Morgan, are right to call for real interest-rate caps on payday, car-title and open-end loans and restore common-sense, conservative principles in the commonwealth. Virginia needs to stand with them in supporting House Bill 1441.

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Washington state regulators have ordered payday lending giant Checkmate to drop its new gift card program, saying it violates consumer-protection laws.

Checkmates program – launched after the Legislature passed new payday lending laws last year – lets consumers borrow pre-loaded, $100 gift cards for such retailers as Safeway, Fred Meyer and Wal-Mart. Consumers have 15 to 45 days to pay back the loan, which carries an annual percentage rate of up to 391 percent.

The states Department of Financial Institutions say the gift cards appear to be an attempt to skirt the statute. The law prohibits more than eight payday loans per person per year. It also bans a lender from giving money to someone who owes more than $700 – or 30 percent in monthly income – in payday debt.

The state said Checkmate had specifically marketed the cards to people who had reached their eight-loan limit, and that 60 percent of loans at one branch in Tumwater had been made to people who had maxed out their limit, according to DFIs cease-and-desist order.

A third of the Tumwater borrowers were already in default from loans from a payday competitor, the state said.

The problem is that the cards carry hefty fees similar to loans and are easily converted into cash, said Deb Bortner, director of DFIs division of consumer services. But theyre not being regulated under the payday loan laws.

(They) look a lot like a payday loan, and we believe and allege that the type of loan they are making is an attempt to evade that statute, Bortner told KOMO Friday.

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The bill could come up for a vote on the Senate floor as early as today.

After Thursdays vote, House Banking Committee Chairman George Flaggs, D-Vicksburg, said the Senate change was more for the industry than for the consumer. They sided with the industry.

Dan Robinson, who owns 28 payday lending stores in Mississippi, supported the Senate change, saying it will help more rural payday lenders to make ends meet. Theyre going to have to be creative, he said.

Under the House version, he said payday lenders would look at a 20 percent to 25 percent cut in revenue. He guessed the Senate version would bring a 10 percent to 15 percent cut.

He predicted House and Senate members would hammer out the difference in conference committee and agree on something in between.

Mississippis 572-percent rate is the highest in the Southeast and one of the highest in the nation.

Mississippi law enabling payday lending expires in 2012. North Carolina let its payday law sunset in 2006. Seven states and the District of Columbia have made similar changes.

A Clarion-Ledger series last month chronicled how some Mississippians have been caught in a payday trap, spiraling deeper into debt.

The Senate Banking Committee tweaked House Bill 455 passed earlier this week. State Sen. J. Walter Michel, D-Jackson, proposed an amendment to enable consumers to borrow up to $300 with reduced fees, rather than $200 under the House bill.

Senate Banking Committee Chairman Gary Jackson, R-French Camp, encouraged the committee to adopt the House version, saying he wanted to avoid the bloodbath that took place in the House.

Nobody wants blood on the floor, said state Sen. Billy Hewes, R-Gulfport, but he said he didnt want to have his vote bound by what the House did.

The average payday loan in Mississippi is $287, and Hewes said it would make sense to have the smaller fee cover this amount.

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Bridgetons planning commission wants the City Council to impose
a six-month freeze on licenses or permits for short-term loan
establishments, payday loan businesses, currency exchanges, tattoo
shops, pawn shops, sexually oriented establishments and other
similar establishments.

The freeze would allow the city time to study zoning issues
related to such businesses and incorporate zoning law changes, if
needed. Tobacco shops were a late addition to the study list
recommended by the commission.

A presentation made to the council Wednesday night by planning
administrator David Bookless drew no public comment, but council
members indicated that they would need to resolve their own
questions before a final vote, set for February.

Businesses now in operation would not be affected. The city does
not have trouble from such businesses currently, Police Chief
Donald Hood said. Right now, its a zoning matter, not a police
matter, he said.

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