Interest grows in payday loan companies populating Poconos
February 5, 2006 - Stroudsburg, Pennsylvania
Advance America, the local payday loan emporium, may be a disastrous financial step backward for most borrowers, consumer advocates warn.
Exploiting a loophole in the state's usury laws, payday loan storefronts are spreading in Pennsylvania despite the fact that they charge more than 400 annual percentage rate on their loans.
For instance, a customer who borrows $100 from Stroudsburg's Advance America store must pay back $119 after 14 days -- $100 for the principal and 19 percent interest. The rates are posted prominently on the wall.
Advance America makes it clear that its high-interest loans are written primarily for customers with bad or no credit.
A customer can get a cash advance loan whether he or she has good or bad credit histories, and even no credit history, a company brochure states.
Gov. Ed Rendell last month pledged to shut down the predatory lenders who are able to sidestep Commonwealth lending laws by fronting for out-of-state banks. The loan company and the bank split the high-interest earnings.
In addition, the Pennsylvania Senate is considering legislation that would crack down on payday lenders by simply applying the state's usury laws to payday loans. State law caps interest rates at 28 percent.
A visit to Advance America at 1240 N. Ninth St. Route 611 in Stroudsburg reveals how the system works. The prospective borrower turns over a post-dated check for the amount to be borrowed. An Advance America representative gives the customer loan documents from BankWest of South Dakota. The out-of-state bank is not bound by Pennsylvania lending laws.
"In effect the customer is giving the lender a bad check because if he had $100 in his account he would not be borrowing the money," said Public Interest Advocate Jim Swoyer.
Advance's Stroudsburg office manager, Lynette Drayton, declined comment and referred questions to the Advance America headquarters in North Carolina. Several calls to the headquarters were not returned.
Critics of Advance and other payday loan companies assert the big money is made when customers roll over their loans. The annual percentage rates can climb to 900 percent as new loans are piled on the old one and the interest due.
Regardless of the warnings and high interest rates prominently displayed on the wall, demand for payday loans remains strong and getting stronger.
Advance has 2,600 locations in 39 states. In 2004, the company had net income of $115 million before taxes on gross business of $570 million. Only two year previous, the company took in half as much.
The Pocono Record, William Doolittle, Writer for The Pocono Record
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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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