Cash Advance's loans in N.C. ruled illegal
December 23, 2005 - Winston-Salem, North Carolina
The N.C. commissioner of banks, Joseph Smith Jr., ruled yesterday that Advance America Cash Advance Centers of N.C. Inc. must immediately stop payday-lending operations in the state.
Roy Cooper, the attorney general for North Carolina, prosecuted a case in front of Smith against Advance America, based in Spartanburg, S.C., that argued that the company used out-of-state banks to make payday loans illegally in North Carolina.
"This decision means that payday lenders using this rent-a-charter model are operating illegally in North Carolina," Cooper said yesterday.
Smith agreed with Cooper's claim that Advance America was making small, short-term loans and charging fees with annual percentage rates exceeding 400 percent. The state's consumer-finance law caps annual percentage rates on small loans at 36 percent.
Advance America, one of the nation's biggest payday lenders, contended that although it offers the loans, Republic Bank & Trust Co. of Kentucky underwrites and originates them and isn't regulated by North Carolina. The company has 117 offices in North Carolina, including 21 offices in the Triad and five in Forsyth County.
Advance America officials could not be reached for comment.
The Center for Responsible Lending, based in Durham, said it hopes that the commissioner's decision will compel four other payday lenders using the rent-a-bank strategy to "sever these relationships and leave North Carolina."
Advance America said Sept. 15 that it would temporarily stop making new loans in North Carolina pending the commissioner's decision, but would continue to service all outstanding loans and cash advances. It is not clear whether the order affects the outstanding loans and cash advances.
"I think it would be unwise of them to try to collect on past loans that have been ruled as being illegal loans," said Paul Brand Jr., an attorney for Trial Lawyers for Public Justice in Washington.
The Winston-Salem Journal, reported by Richard Craver, Journal Reporter
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