Payday loans draw state’s interest
October 13, 2005
The attorney general’s office is concerned about the lending practices of payday loan companies and is proposing stricter regulations.
Payday loan advocates said the companies provide a valuable service and are already regulated.
The attorney general’s office hosted a meeting Wednesday at the Clovis-Carver Public Library to discuss proposed regulations, which include eliminating 14- or 30-day loans, a cap on interest (at 54 percent) and service fees.
Assistant Attorney General Joel Cruz-Esparza said the state’s Consumer Protection Division found small loan companies are engaged in unfair business practices. The attorney general believes many small loan companies do not consider the borrower’s credit history and ability to pay back a high-interest loan within two weeks to one month.
“It’s currently difficult for people to repay small loans,” Cruz-Esparza said. “Small loans will become repayable under these regulations.”
Steve Solomon, vice president of administration and general counsel for Fast Bucks Holding Corp., said the industry receives few complaints annually with high levels of customer satisfaction.
Solomon also represents Consumer Lending Advocates, which consists of 13 small loans franchise corporations throughout the state.
“We have had one complaint per 30,000 transactions,” Solomon said.
Small loans companies said the proposed regulations will put them out of business.
“These regulations would be a horrible job killer,” Solomon said. “They’ll put us out of business.”
Representatives from Attorney General Patricia Madrid’s camp disagrees.
Pawnbrokers in this state are regulated to the same degree that’s proposed for small loans companies, and “the pawn brokerage industry is alive and well,” Cruz-Esparza said.
According to Madrid’s office, there are 24 licensed small loans companies in Curry County.
Solomon said Madrid’s office spent $145,000 on a television ad campaign aimed at eliciting complaint from the public consumer.
“This is an outrage,” Solomon said. “Madrid’s office received only 46 complaints against my industry, at $3,152 per complaint.”
Solomon suggested the Attorney General’s Office spend advertising funds to educate the public on personal financial literacy.
Small Loans company representatives say customers are satisfied and franchisers are profiting.
According to Fast Bucks’ Web site the average annual profit of a franchise is more than 50 percent.
The Consumer Lending Advocates claim “Customers overwhelmingly appreciate payday advance, 92 perecent believe it’s a useful service.”
The Attorney General’s office has legal authority to adopt these rules and regulations under the Unfair Practices Act.