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September 8, 2006 - Jackson, Mississippi

Per capita, Mississippi ranks third in the nation in the number of check cashing/cash advance outlets, commonly referred to as payday lenders, according to the Mississippi Center for Justice.

Roughly 1,200 payday lenders operate in Mississippi. Only New Mexico and South Dakota have more payday lenders per 100,000 population than Mississippi, says the nonprofit center, which is pushing for legislation to require the businesses to disclose certain information about the loans they make.

"No one riding through our state's cities and towns can fail to notice the phenomenal proliferation of payday lenders," said Paheadra Robinson, an attorney for the Center for Justice. "Without any reporting, the public has no way to judge the abuses -- and even the arguable benefits -- of this increasingly pervasive industry."

In Mississippi, 7.6 million borrowers a year take out up to 83 million loans, which generates an estimated $2 billion in annual revenue for payday lenders, the center says. "They're taking advantage of the poor," Robinson said.

But Pat Steverson, district manager for A-1 Check-Cashing Inc., which operates six businesses in the metro area, said payday lenders don't prey on low-income residents; they help them.

"They may not have enough money to pay bills," Steverson said. "We help them avoid having to pay another deposit to get utilities turned back on -- if cut off."

The businesses charge hefty interest payments and fees and cater to people with no bank account, temporary financial problems or who need extra cash.

Darnell Brown of Jackson said Thursday after doing business at Paycheck Loans on Ellis Avenue that he likes the service "because it's no hassle. They give you no problems."

Brown said he does business about once a month at a payday lender.

Payday lenders can charge an $18 fee on each $100 borrowed. The full principal with interest is due on the next payday.

The cost of excessive interest for small loans taken in a time of need is money that would otherwise go for basic living expenses, such as groceries, school supplies, transportation, diapers and other household needs, the center says.

The typical two-week loan has an annual percentage rate of 468 percent on a $400 loan, according to the Center for Justice.

Before regulations took effect July 1, 1998, there were no limits on fees check-cashing businesses could charge customers. The regulations limited the amount of fee to $18 per $100 borrowed. Also, the regulations restricted who could open a check-cashing operation and required businesses to post fees in a place that can be seen by customers.

Businesses also used to allow consumers to roll over checks. Rollovers, which some called the worst form of consumer abuse, are now illegal. They had allowed customers to cash a check for more than they could cover and set up provisions for the customer to pay a weekly or monthly fee until the check was paid off.

The fees didn't go toward repayment of the check and were sometimes more than the value of the check, Department of Banking and Consumer Finance officials said. Violators can face a fine of $500 for each occurrence and civil penalties.

The Center for Justice again will push for -- in the 2007 Legislature -- a system requiring payday lenders to detail specifics about each loan made to determine if customers are being abused. Bills introduced in 2006 and 2005 for limited reporting requirements failed.

State Rep. Daniel D. Guice Jr., R-Ocean Springs, said he believes the industry already is appropriately regulated. Guice, who is chairman of the Banking and Finance Services Committee, said he did not recall the previous legislation but said the bills likely failed because they were "unreasonable."

"If something unreasonable is introduced again, it probably will have the same outcome," he said. "We're not going to regulate these people out of business. That would be wrong."

Guice also said he believes opponents of payday lenders are mistaken that the businesses prey on people. Instead, he said they service a niche population that would bounce checks if not for cash advances.

"The people these folks say they are concerned about, they can't go to a bank and they can't get a small loan," he said. "If these lenders go out of business, then where are those people going to go? To the loan sharks, that's where they're have to go."

Worried that check cashing/cash advance outlets are saturating Jackson, City Councilman Marshand Crisler wants a six-month moratorium on such businesses opening. Crisler said liquor stores, pawn shops and check cashing/cash advance services generally prey on low-income residents.

There are roughly 50 check cashing/cash advance businesses in Jackson. A moratorium would give the city time to come up with a plan to regulate how many such businesses can operate in a certain area, Crisler said.

"I counted nine of these businesses along Terry Road," Crisler said last week.

Crisler's proposal is awaiting action by a city planning committee, where it has been since May 3, 2005. Crisler said the proposed legislation is under review by the Legal Department.

News Source

The Clarion-Ledger, Jimmie E. Gates, Staff Writer - Kathleen Baydala, Staff Writer

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