Payday-loan businesses still operate
January 12, 2006 - Greensboro, North Carolina
Businesses that loan consumers money until payday continue to operate in North Carolina despite a ruling condemning their business practices by the state's leading banking official.
N.C. Banking Commissioner Joseph Smith Jr. ordered one of the nation's largest so-called "payday lenders," Advance America, to close last month, saying the business violated the state's lending laws.
But Advance America has appealed that ruling to the full banking commission, and other similar businesses continue to operate, saying Smith's order doesn't apply to them.
Jabo Covert, vice president of legal and government relations for Check Into Cash, which operates about 40 stores in the state, said the ruling did not apply to anyone but Spartanburg, S.C.-based Advance America.
But he added that "the bottom line is ... the General Assembly needs to address the problem and pass a regulatory bill that deals with the issue. North Carolina is trying to make itself an island."
About 40 states permit payday lenders to operate within their borders. From 1997 to 2001, North Carolina did, too. But the state legislature let the law allowing payday lenders to operate expire and did not renew it.
Payday lenders got around that by partnering with out-of-state banks that acted as agents for the companies, which previously pre-empted state regulation under the Federal Deposit Insurance Act.
Customers who use such businesses write a check, post-dated to their payday, that includes the loan amount plus interest, generally a minimum of about $15 for every $100 loaned.
Payday lenders can charge interest rates exceeding 400 percent per year. But state law caps annual rates on small loans such as those sold at payday lenders at 36 percent.
Critics say payday lenders trap consumers in debt cycles.
The industry and other supporters say the stores provide a service that consumers want and do not have access to through banks.
Before Smith's ruling, Advance America had stopped selling loans in its 117 stores in North Carolina because First Fidelity Bank of Burke, S.D., said it was suspending its arrangement with the company.
Advance America appealed Smith's December ruling to the banking commission. Company attorney Saul Pilchen said he does not know when a decision will be made.
A spokeswoman for Smith declined to comment on the case and how it might affect other payday lenders.
A spokeswoman for N.C. Attorney General Roy Cooper declined to say if his office would file individual lawsuits against the other payday lenders in the state.
News & Record, Marta Hummel, Staff Writer
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- Payday lending cultivates legislative support for comeback [September 28, 2006]
- Advance America to stop providing payday loans to military personnel [September 25, 2006]
- Advance America buying back stock [September 12, 2006]
- New state laws regulate payday-advance loans [August 27, 2006]
- Advance America increases stock repurchase program by 100 million dollars [August 16, 2006]
- Advance America retreats [July 28, 2006]
- Advance America announces results of second quarter [July 26, 2006]
- Lenders cashing in on short-term loans [July 16, 2006]
- Military personnel prime targets for loans [July 9, 2006]
- Payday lenders reinventing business model to skirt state law, opponent says [June 27, 2006]
- Critics say high-price 'Choice' loan is still illegal [June 22, 2006]
- Advance America Cash Advance Centers upgraded to 'market outperform' [June 22, 2006]
- House bill proposes new short-term loan [June 2, 2006]
- Short-term payday loans do a booming business in N.H. [May 14, 2006]
- Payday loan company makes travel donations to group chaired by Richardson [April 1, 2006]
- Nation's largest payday lender looks at possibly pulling out of Arkansas [March 21, 2006]
- Advance America to stop operations in Arkansas [March 20, 2006]
- Advance America to cease payday loan ops in Pennsylvania [March 7, 2006]
- Three NC payday lenders agree to close, nearly drying up industry [March 1, 2006]
- Interest grows in payday loan companies populating Poconos [February 5, 2006]
- Payday-loan businesses still operate [January 12, 2006]
- Advance America Cash Advance 'market perform,' estimates reduced [December 28, 2005]
- Cash Advance's loans in N.C. ruled illegal [December 23, 2005]
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