Payday lenders outlawed for predatory practices
Consumers seeking small, short-term loans will no longer have access to payday lenders that profit by charging sky-high interest because of an agreement announced March 1 between the three largest companies and the NC attorney general.
Roy Cooper revealed the agreements between his office and Check Into Cash, Check ‘n’ Go and First American Cash Advance. Another company, Advance America, ceased making loans in September and suffered a legal setback from the NC Banking Commission in December. Advance America is appealing that ruling, which concerned the legality of using out-of-state charters to dodge North Carolina’s predatory lending law.
In accordance with the most recent agreement, the three companies will pay a total of $700,000 to fund financial literacy programs. Consumer Credit Counseling Services of Greater Greensboro will receive $65,000 from those funds. They will use the money to fund ongoing counseling and financial literacy services, said counseling supervisor Paul McCollum.
‘“A lot of it has to do with the Commission of Banks ruling against Advance America,’” said Noelle Talley, a spokeswoman for the attorney general. ‘“It is illegal for payday lenders to operate in the state.’”
North Carolina lawmakers experimented with legalizing payday lenders in 1997 but allowed the law to sunset in 2001. Since then, Cooper has aggressively pursued the lenders who continued to operate in the state using the rent-a-charter model favored by Advance America.
The lenders have between 30 and 120 days to collect only the principal amount of the loan. Check Into Cash and Check ‘n’ Go will close up shop and First American intends to get licensed as a lender that would have to abide by North Carolina laws, according to the attorney general’s statement.
Payday lenders typically provided same day cash to be repaid within two weeks. Interest on the loans, when computed as an annual percentage rate, ranged between 200 and 400 percent. Licensed consumer finance lenders can legally charge up to 36 percent on loans less than $600.
McCollum suggested that people who find themselves in a financial bind should consider talking to employers about an advance, seek small loans from banks or credit unions or talk to family and friends. Consumer Credit Counseling Services of Greater Greensboro provides financial counseling services free of charge.
‘“We have had several individuals who have come in over the years who have been victims of this kind of predatory lending,’” he said. ‘“We try to help them get out from under the debt. Short loans with weekly fees tend to sort of take on a life of their own.’”
‘’— Amy Kingsley