A payday loan revival in NC

From a politically conservative standpoint, people should be able to make as much money as they can with little government interference.  If there is a need for the product, somebody should be able to sell it and make a reasonable profit.  This idea of a free market often protects the vendor, who may get predatory and leave the consumer with a big price to pay.

One example is the payday loan.  Payday loans are short-term cash given to applicants.  These cash amounts are usually small, rarely exceeding $1,000, and the loan’s term is also small.  A payday loan holder will have either two weeks or until his/her next paycheck to pay back the loan, plus interest.  If the holder of the loan fails to pay back the entire amount when due, fees are tacked on.  With the exorbitant fees on payday loans, many people who get a $500 loan end up owing twice or three times the original amount!

Well, wouldn’t you know it, the newly-elected Senate of North Carolina is trying to bring back payday loans!  Payday loans were officially banned in 2001, though some operators managed to keep them going until Attorney General Roy Cooper stepped in to shut them down in 2006.  In 2011 Regions Bank, operating from Alabama, took advantage of a state loophole and offered a loan that charged $1 per every $10 borrowed and tagged a 21 percent interest rate onto unpaid balances.  It was, in essence, a payday loan, and it was shut down in North Carolina last month.

Senate Bill 89, however, plans to re-open payday loans to North Carolina.  Filer of the bill, Senator Jerry Tillman (Republican- Randolph Co.), claims there are more regulations on this bill than in any previous proposal.  The maximum amount for any payday loan will be $500, and the maximum “interest” will be 15 percent.  (Of course, in Section 2 of SB 89, it is not called interest, but a “fee to defray operational costs.”)  Consumers cannot purchase another payday loan until the first one is paid off, and in the words of Tillman, “You’ve got 35 days to pay it back. If you don’t, you’re finished.”  It seems like the regulation is all on the consumer and not on the lender.

Senator Tillman says he has had people ask him why North Carolina can’t have another chance at payday lending “and do it right.”  These people, of course, would be lobbyistsSupporters of the bill include former House Speaker Harold Brubaker (now working for the Community Financial Services Association of America, the payday lending industry group), former state Republican Party Chairman Tom Fetzer (voted the second-most influential lobbyist last session!), and John McMillan (the top lobbyist of 2010!).  Noted critic of the bill, state Attorney General Roy Cooper, had a telling quote about the dangers of this industry:  “Payday lending is like needing a life preserver and being thrown an anvil.”  Cooper has assured us that Tillman’s bill will not allow payday loans to be made to military families, so at least the ones protecting us and our rights to make stupid choices will be protected from making this stupid choice.

SB 89 was filed in the Senate on February 13, 2013 and it was sent to a committee the very next day.  Once SB 89 is passed by the Senate, a companion bill will be needed in the House, and the law would go into effect July 1.  Payday lenders claim their industry helps people with poor credit, but if SB 89 becomes law, I and everyone else here submitting articles for Debtors Unite know that people’s credit scores may only get worse.  There is no amount of regulation that will keep predatory lenders from offering loans with high fees (see above:  Regions Bank).  It is highly suggested that you, the consumer, stay away from payday loans at all costs!

David Pilley

David Pilley

David Pilley is a May 2010 graduate of the University of North Carolina at Chapel Hill, with a B.A. in communication studies and a creative writing minor. He is a native of Raleigh, North Carolina.

He played clarinet for the Marching Tar Heels in 2005 and 2006. He also volunteered for STV, the student-run television station at UNC-Chapel Hill, in the spring of 2010. He shot video, wrote scripts, and acted for “Off the Cuff,” UNC’s longest running sketch comedy show. He has the rare distinction of having lived in a dorm all four years of his undergraduate college career. He was also on Franklin Street on the night of April 4, 2009. His future plans are to pursue a master’s degree in journalism and to one day work for the media as a sports journalist or broadcaster.

Being one of eight children, David realizes finance is an important topic to everyone, regardless of his/her knowledge of the subject. His interests are in personal finance, budgeting, and savings.

In his spare time, David enjoys watching sports and standup comedy, as well as doing crossword puzzles and writing in the first person. He also thoroughly enjoys trivia and, one day, hopes to participate on the game show Jeopardy!, where he will try to break Ken Jennings’ 74-game win streak.
David Pilley

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