Governor Lynch Comes To the Rescue of Would-Be Borrowers

February 21st, 2012

Loan veto protects consumers

Once again Governor Lynch has come to the rescue of New Hampshire consumers. On Jan. 27, 2012, he vetoed Senate Bill 160, which would create a new small loan product we don’t need. In his veto message he explained that SB 160 would legalize excessive interest rates for these so-called “installment loans”, meaning payday loans, that would hurt our families, communities and economy. “That is why 31 other states, including all the other New England states, ban these types of excessive interest rates for consumer credit.”

 

Example

As an example, SB 160 would allow a lender to charge nominal interest of $15.50 per $100 installment, but also allow as many as 26 installments per year. This could result in the Annual Percentage Rate being in excess of 400 percent! On a six-month loan with payments every two weeks, a lender would be able to charge a consumer over $1,100 to repay a $500 loan!

 

Regulation of lenders

Lynch also warned that oversight and regulation of lenders would be weaker under SB 160 than current practices for other forms of consumer credit. Thus, consumers would not receive the same level of protection as would normally be expected. SB 160 was strongly opposed by both Republicans and Democrats in the Legislature, the N.H. Attorney General’s Office and N.H. Legal Assistance, as well as other organizations interested in protecting consumer rights. Yet the Republican majority ignored their warnings and passed the legislation.

Tags: Governor Lynch, Payday loans, SB 160
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Court Blocks Colorado AG from Investigating Tribes’ Online Payday Loans

February 18th, 2012

Court rules in favor of tribes operating online payday loans

According to a court ruling this week, the Colorado Attorney General’s office can no longer investigate two American Indian tribes offering online payday loans. Denver District Court Judge Morris Hoffman ruled that the Miami tribe of Oklahoma and the Santee Sioux Nation of Nebraska are protected by tribal sovereign immunity laws from state investigation.

 

8 Years

The ruling culminates eight years of inquiries by the Attorney General’s office over allegations that Colorado residents were victimized by high-interest-rate payday loans that violated state laws. The ability of Indian tribes to conduct Internet commerce without regulatory oversight by states is “the bedrock of tribal sovereignty and it is refreshing to see that the court got it right,” said Barry Brandon, executive director of the Native American Fair Commerce Coalition, an advocacy group for tribes engaging in online business.

 

Disappointing

The Attorney General’s office termed the ruling “disappointing.” “We remain concerned at the proliferation of online payday lenders who are operating in violation of Colorado law and harming Colorado consumers,” said Jan Zavislan, deputy attorney general and head of the office’s consumer protection division. The office has not determined if it will appeal the ruling.

 

Payday lenders

Payday lenders issue short-term loans, typically at significantly higher interest rates than bank loans. Colorado in 2010 passed a law with more consumer protections on payday lending, but the loans investigated by the Attorney General allegedly violated even the looser regulations in effect prior to 2010. The AG’s office has alleged that the loan companies, Cash Advance and Preferred Cash Loans, are controlled by Overland Park, Kan. businessman Scott Tucker, and that the tribal affiliations were created to circumvent state regulations.

 

“Rent-a-tribe”

Hoffman said in the court ruling that “the state has failed to prove that the tribes do not own and operate these tribal entities” that are listed as the owners of the payday loan companies.

Tags: American Indian tribes, Payday lenders, Payday loans
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Watch Out For Phony Payday Loan Collection Calls

February 17th, 2012

Scare tactics being used

Everyone hates receiving calls from a bill collector, and it’s worse if the collector threatens to have you arrested. According to consumers who have recently contacted the BBB, these are exactly the types of calls they’ve received, but they don’t owe the debt and the collector isn’t who he says he is. While calls are coming from different numbers and the caller may even impersonate a police officer, the pitch is always the same. The caller tells the consumer they owe a debt on a payday loan and due to their nonpayment, they are going to be arrested unless they pay it over the phone immediately.

 

Scare tactics

“We have heard of these scare tactics being used in such scams before,” said Dale Mingilton, president and CEO of the BBB Serving Denver/Boulder. “But we urge consumers not to panic and to verify debts and know their rights before making any payment to anyone.” A consumer who contacted the BBB said the number she received the fraudulent collection call from was (408) 905-2092 and the caller said he was a police offer. He claimed she had a loan with Cash Advance America and needed to give him her credit card number in order to avoid being arrested for fraud. A Google search of this phone number show several posts from people who have been threatened in the same manner. Another consumer said she has received calls from (756) 852-1452 and the caller said he was an attorney for U.S. Payday Loans and they will have her arrested if she does not pay $5,000 immediately.

 

Protections

The Colorado Fair Debt Collection Practices Act provides many protections for consumers including the prohibition of threatening and harassing communications, false claims of government affiliations and misrepresentation.

 

File a complaint

People receiving such calls or letters are encouraged to file a complaint with the Colorado Collection Agency Board at www.coloradoattorneygeneral.gov/complaint, over the phone via 1-800-222-4444 or by e-mail to cab@state.co.us.

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A Payday Loan Business

February 12th, 2012

From her Memphis shop, Lisa doles out cash to customers who pay her $30

“There is a segment of the population that can’t go to a bank and borrow $200. They don’t deal with banks,” said Lisa Brock, owner of a quick cash store. “But they need short-term loans. They need money to fix their car or go to a doctor.” Now, a new federal watchdog is gearing up to patrol the 36,000 loan shops like hers throughout the nation just like they were regular banks.

 

Paydays

Tens of thousands of Memphians long have relied on cash rather than paper checks or plastic credit cards, giving rise to about 400 quick-loan stores in the metropolitan area.

Instead of going to banks, many Memphians for years tapped pawn shops, loan sharks, friends, colleagues and relatives. Then the quick-loan business stepped up in the last decade, lining Memphis-area streets with almost two shops for every bank branch.

 

Social activists

Social activists contend the quick-loan trade works against the city’s poorer families. Loan fees and interest payments, activists say, can surpass the cost of a regular checking account by several hundred dollars per year for frequent borrowers. What’s not clear is whether Washington will scale back loan volumes by imposing sterner rules than Tennessee’s.

 

Toughen up

While some Republican members of Congress are still trying to derail the federal agency, Tennessee consumer advocates argue for tougher rules flowing from Washington.

In Nashville, some activists favor clearer records that identify the loan shop owners. And activists want payday rates dialed back.

 

Repayment

Payday customers often fail to repay the loan on time. Then they borrow again to retire the first loan. Caught in this cycle, 12 million of the nation’s 19 million payday customers take out at least five payday loans per year, according to a 2009 study by the Center for Responsible Lending, a liberal group in Durham, N.C. Tennessee law limits loans to $500, and allows no more than three loans at once to a single customer.

 

Meeting needs

Not everyone thinks that’s a deep problem. Tennessee state Rep. Steve McManus, R-Cordova, said payday shops fit a purpose. “If banks are reluctant to lend, and many are, this fulfills a need for these people,” said McManus, chairman of the House commerce committee, which oversees the state’s financial institutions agency. “With the unemployment rate as high as it is,” McManus said, “people have to have the means of trying to get some kind of liquidity.”

 

Why more paydays?

The 38 states that permit the trade counted 2,000 payday shops in 1996. Within a decade, the number had multiplied to 24,000, according to a report by the Federal Reserve Board, an agency regulating banks and the U.S. money supply. About 12,000 title-pledge shops lend money on cars.

 

No money

Brock, the payday lender on Summer Avenue. “They don’t understand what it’s like to not have money. You need money to open a checking account, but a lot of people don’t have it.” That doesn’t mean they’re destitute, Brock said. Her customers work, she said, often for low wages. They show her paychecks and sometimes tax forms. Tennessee financial department examiners enter Brock’s shop twice a year, she said, checking her records to make sure loan contracts follow the state rules. “I think the state regulates the industry very well,” Brock said. “I don’t see the need for a federal agency to oversee it.”

Tags: Financial help, Interest rates, Payday loans, Short term loans
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They Learned Hard Way; Payday Loans Are Illegal In NC

February 11th, 2012

It is difficult to enforce the law against companies that operate over the internet

It is illegal to operate a payday loan businesses in North Carolina. But companies still take on customers. Now, a Triangle couple has been hurt financially. When things got financially tough for Donna Seese and her husband, they surfed the internet and found “advancemetoday.com”.

 

Basics

“We were looking for basic necessities,” said Donna. “You know gas money, food money.” Donna said she told the advancemetoday rep she only needed $300. “What they charge is 30 percent per hundred dollars. So in reality, the total balance due would be $390,” said Donna. “So, what’s going to happen is, you’re going to see a $90 debit come out of your account on every paycheck until the loan is paid off. And I thought that sounded fair.”

 

Interest

Every two weeks, advancemetoday took $90 dollars out of Donna’s bank account. When the time came for the fourth $90 to be taken out, Donna thought she was close to paying off the loan, but she learned differently when she talked to an advancemetoday rep. “He said ‘the $90 payments have all gone to interest,’” recalled Donna. “And I said, ‘Excuse me? Can you please explain that again?’” What Donna never realized was that each $90 payment every two weeks never went to her original $300 loan. Instead she was charged interest of $90 every two weeks until she repaid the 300 in full. When Donna complained to advancemetoday, they debited the entire 390 from her account to close out her loan.  In all, Donna paid over $660 for a $300 loan.

 

That hurts

“It’s definitely hurt us, because in the first place we were in a bad position,” said Donna. “This puts us in a much worse position. I don’t want to see more victims. I don’t want to see anyone else go through what I’ve gone through because it’s impacted us greatly.” The one bit of good news for Donna is that she did dispute the last charge of $390 with her bank, and for now that money has been put back into her account.

 

Illegal

The big red flag is that payday loan companies are illegal here in North Carolina.

Advancemetoday does have a disclaimer on their website that says their services are only available to those states permitted by law, and North Carolina is not one of them. A representative with the Attorney General Cooper’s office says it is difficult to enforce the law against companies that operate over the internet, especially if they’re located out of the country. They add, not only are these loans illegal but they also put consumers deeper in debt, which is what happened to Donna.

Tags: Interest rates, Loan fees, North Carolina, Payday loans
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Ferratum Says Beware of Rogue Payday Loan Firms

February 9th, 2012

Unscrupulous payday loan lenders are hard at work

Consumers need to be on their guard against unscrupulous payday loan lenders who are stealing money from people’s accounts, says Ferratum. “The growing demand for the loans is paving the way for rogue operators.” Ian Porter, sales and marketing manager with Ferratum, said: “We have heard horror stories from customers about bad experiences they have had with other operators.

 

Payment up front

“One customer called in the police after falling victim to a scam in which the payday loan company demanded £100 up front before they would process his loan. The loan never came but the company used his bank details to take further money from his account. ”It was only after the customer noticed the shortfall in his account that he called in the police who then launched an investigation into the company.”

 

High rates of interest

“Rather than focussing on the bogus issue of high rates of interest, which are not relevant to short-term lenders such as ourselves, campaigners against the payday loan industry would be better served trying to root out the small number of unscrupulous operators trying to cash in on one of the fastest growing financial sectors.”

Tags: Interest rates, Payday loans, Rogue lenders
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Take Note: “Debt Collector” Scam Reported

February 2nd, 2012

A Napa man says he’s being harassed by abusive calls over an unidentifiable loan.

Real estate broker Frank Trozzo of Napa says he has been targeted by a widespread scam in which callers demand payment for nonexistent payday loans based on financial information they may have received through identity theft.

 

I want proof

“I said, ‘mail us some proof,’” said Trozzo, who contacted Napa Patch on Monday to report the calls. “He yelled at me and hung up.” Trozzo says he’s baffled as to how the caller got personal information about the family member whose financial affairs Trozzo manages. There’s no documentation of the $350 loan the caller is seeking, Trozzo said.

 

F-bomb dropped

On his second call, in December, the man identifying himself as Austin White dropped an angry F-bomb on Trozzo and told him law enforcement authorities would be “coming to my house tomorrow,” Trozzo said. In his third contact on Monday, White again grew angry and threatened to call authorities, said Trozzo, who did some research after hanging up and found a warning from the Better Business Bureau: ‘According to reports received by BBB, the scammers accuse the victim of defaulting on a payday loan and claim they are being sued. The phony debt collector threatens that, if the victim doesn’t pay as much as $1,000 immediately via wire or by providing bank account or credit card numbers, he or she will be arrested.

 

Personal details

The scammers often have the victim’s Social Security, old bank account numbers or driver’s license numbers as well as home addresses, employer information and even the names of personal friends and professional references. Trozzo said when he asked White to furnish some documentation of the alleged loan, he was told “We can’t give you that.”

 

 

Better Business Bureau

The Better Business Bureau recommends that consumers

• Ask for official documentation from callers who claim to be debt collectors;
• Don’t provide or confirm any personal or financial information over the phone;
• File a complaint with the Federal Trade Commission if the caller is abusive and/or uses threats, both violations of federal telemarketing laws.

 

Scambook.com

On websites like scambook.com, where consumers report suspicious phone calls, there are many other reports like Trozzo’s of bullying calls from men who often have accents. A voicemail, requesting comment, from Napa Patch to the phone number White gave Trozzo was not returned Monday or Tuesday. The outgoing message at the toll-free number did not give a name.

 

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On A Question of Bankruptcy

January 30th, 2012

Will my payday loans be wiped out in my bankruptcy?

This question was asked by someone who has Payday and other loans that he cannot repay. “I’ve taken out several payday loans that I can’t pay back and now I owe them a lot of money as well as owing a lot of other money. Will those payday loans go away if I file bankruptcy?”

 

Background

Payday loans are short-term loans with a very high interest rate. If you can’t pay them off as planned, they can become a large debt burden. To get those loans, you give the lender a post-dated check which they will deposit if you don’t make the payments. In the case of online payday lenders, you agree to let them take their money from your bank account if you don’t keep up with the payments.

 

Answer

You may not owe enough on payday loans to make it worthwhile to file bankruptcy, but if you also have debts from credit cards and other things, possibly bankruptcy would be valuable for you. Your entire financial situation would need to be reviewed by an experienced bankruptcy attorney, but for now let’s say that you’ve decided to file bankruptcy and are wondering about your payday loans.

 

The payday loans

Many pages have been written on this subject which you can find on the internet, but here’s the short version:

In general, your payday loans would be treated just as any other unsecured debts (like credit cards) and would be discharged (eliminated) in your bankruptcy.

 

Post-dated checks

The post-dated check you gave them (or the agreement to take the funds from your bank account) should be dealt with before you file bankruptcy by closing that bank account. But first open a new one so you know you have some place to put the money from that old account. If you don’t do this, the payday lender will simply cash the check and take the money. You might be able to get that money back by suing the lender as a part of your bankruptcy case (called an adversary proceeding) but that might cost more than the amount of money taken by the lender. It’s much better to just avoid the problem.

 

Payday loans

If you took out a payday loan close to filing bankruptcy, the lender could claim that you knew at the time that you weren’t able to pay it back. The lender may not bother to claim that, but I’d prefer that you wait three months after the last payday loan to file bankruptcy.

 

Jail?

You will NOT go to jail for causing the post-dated check to bounce. The lender knew at the time it took your check that you didn’t have money in the account to cover it, so it wouldn’t become a “bad check” in the criminal sense regardless of what the payday lender may tell you.

 

Best advice

Of course the best advice is to never take these very expensive payday loans. It’s too late for that to help now, but think about it in the future.

Tags: Bankruptcy, Payday loans
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Letter: Advertising Payday Lender Rates Would Help

January 23rd, 2012

Irate letter-writer challenges the payday loan industry

I am offering the Avalanche-Journal, creator of the Savvy Shopper, a golden opportunity to deliver on its aspirations of serving the local public by providing pertinent education, in this case the subject of Payday Loans.

 

Loan charges

My inquiries among local outlets reveal that payday lenders can charge between $21 and $25 for a $100 loan, payment due by the borrower’s next payday. That’s 21-25 percent interest over the term of the loan. (What other way can a businessman turn $100 into $125 in less than a month?) The equivalent in terms of APR is too stratospheric for me to calculate.

 

Interest rates

The Avalanche-Journal addresses the issue of high payday loan interest rates in a Jan. 13 editorial: “Educating consumers as to why they shouldn’t make bad financial decisions is a better investment than regulations that protect them without addressing their ignorance. Knowledgeable individuals always make better decisions for themselves than any army of enlightened technocrats could make for them.”

 

Publish the interest rates

If the editors are sincere in their assessment of the problem, let them publish the interest rates payday lenders charge. This will give persons in need of loans a good advance idea of what the cost will be for using payday loan services, improving the likelihood of sensible decisions. Surely the editors will not be unwilling to use the Avalanche-Journal to take this small step in contributing to consumers’ education, if they truly believe lack of education is the problem.

 

It’s expensive

Meanwhile, payday lenders’ policies exemplify the adage “It’s expensive to be poor.”

 

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Payday Lender AEA and Its 391% APR Should Be Just Fine Despite New Consumer Cop

January 11th, 2012

All eyes watching the new consumer protector

While the Senate was on break last week, and thereby circumventing Republican opposition to the appointment, President Obama announced his decision to install former Ohio Attorney General Richard Cordray as the director of the new Consumer Financial Protection Bureau. As the President stated, it is his “New Year’s resolution” to all Americans to “keep doing whatever it takes to move this economy forward and to make sure that middle-class families regain the security they’ve lost over the past decade.”

 

Stocks drop

Cordray’s appointment to the Consumer Financial Protection Bureau (CFPB), underscores Obama’s strong conviction to move the financial products industry towards a more secure consumer-driven sector. Following the announcement, several of the alternative financial services lenders saw stock prices drop including payday loan specialist Advance America.

 

Advance America

Founded in 1997 by George D. Johnson and William M. Webster IV, Advance America is the largest non-bank provider of cash advance services in the U.S. With around 2,600 locations, and 5,600 employees in 29 states, the Spartanburg, South Carolina-based company provides short-term, unsecured cash advances that are due on the customer’s next payday. The company’s primary business is offering cash advance services, which consist primarily of cash advances but also include installment loans and lines other ancillary products such as pre-paid debit cards and money order transfers. According to the FAQ’s on the company’s Web site its median payday loan size of $361. Over a two week term it might have a fee of $53, producing an APR (annual percentage rate) of 391%.

 

New rules

Now that the bureau has a Director in place, the CFPB has the power to write new rules and regulations for non-depositories. It is my opinion that having a Director in place shouldn’t change much and little would have changed whether the appointment was for Elizabeth Warren, Cordray or someone else. Representatives from the bureau have been consistent throughout in stating their intentions and Advance America has generally agreed with much of the public comments from the bureau around transparency, full disclosure, simplicity, etc.  In fact, just last week Cordray said, “Now, with a director, the CFPB can exercise its full authorities–with respect to both banks and nonbanks – to help those markets operate fairly, transparently, and competitively.”

Tags: Advance America, Consumer Financial Protection Bureau, Payday loans
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