Bill poised to bring back pay day loan business in NC - | WBTV Charlotte

Bill poised to bring back pay day loan business in NC


North Carolina could become home once again to payday loan businesses if some legislators have their way.

A bill was recently filed by Sen. Jerry Tillman, R-Randolph.

The practice was outlawed in 2001 but according to published reports, Tillman contents there is a need for the service and constituents are asking for it.

"We have people who get in a bind from time to time, good people who have a job," he said to affiliate WRAL.

The classic example, he said, was someone who needs money to repair their car but doesn't have a credit card.

WRAL reports Tillman's bill would cap the amount borrowed at $500 and limit the interest rate to 15 percent. That's lower than payday lending bills from prior sessions but still amounts to an annual percentage rate of 300 percent for a loan repaid in two weeks, consumer advocates say.

Attorney General Roy Cooper fought to rid the state of payday lending and is once again speaking out against it.

"Payday lending is like needing a life preserver and being thrown an anvil," Cooper said. "We've seen it in north Carolina – very high interest. People tend to get on a debt treadmill they have a hard time removing themselves from.

"When you unleash this industry on North Carolina consumers, a lot of people are going to be hurting."

"It starts a vicious cycle and on average it takes 8 months to break the cycle of a pay day loan," Janet Hart with the Better Business Bureau said. "The BBB refers to pay day loans as one of the top 2 worst ways you can raise short term cash."

Across the state line in Ft. Mill, SC several payday lending businesses can be found along a stretch of Highway 21. Damon Galloway says it's his third time using a payday loan for an expense due before his next paycheck. "They're really good about helping you get through those dry times, in between pay checks...I wouldn't recommend anyone become dependent on it. Do it if you have to but make sure you pay the loan back and put yourself in a better financial situation where you do have to continuously do it," Galloway said. Galloway is a student and says paying for school has put him on a tight budget. Fortunately, he says he can pay it back on the due date but consumer advocates warn high interest rates make it hard on others to do the same.

Tillman said he would require that borrowers pay off their payday loans before taking out another and would create a monitoring system to ensure that someone couldn't go to one lender to pay off another.

"The rollover thing is what killed people in the past," Tillman said, adding that the bill will likely be revised.

In a news release on the measure, Cooper noted that the bill would not allow for payday loans to be made to military families.

"Congress already banned payday lending to military personnel in 2007 to protect service members from these predatory loans," he said.

Payday lenders said legalizing their industry again would help people with poor credit.

In a statement to WRAL, Senior Vice President of Advance America Jamie Fulmer said, "It helps ensure that, during economic hardships, North Carolinians have access to reasonable, properly regulated financial options...In recent years, consumers' borrowing choices have narrowed, but their need for credit has not diminished."

A committee is expected to take up the issue this week or next.

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