Payday Loan Accountability

Alabama Mobile In these tough economic times many people are strapped for cash. Making ends meet may mean taking out a payday loan. It's fast cash but can come with a hefty price tag. In this News 5 Investigation Kimberly Curth uncovered activity the State says is illegal.

by Kimberly Curth

Published: Mon, November 24, 2008 - 5:59 pm CST

In these tough economic times, many people are strapped for cash. Whether it's putting food on the table or filling up the gas tank, making ends meet may mean taking out a payday loan. It's fast cash, but can come with a hefty price tag. In this special News 5 Investigation, Kimberly Curth even uncovered activity the State of Alabama says is illegal.

Just look on any street corner in Alabama, or browse the yellow pages, they're not hard to find, "the reasons that we hear from people are just, you know, I just need a little bit extra to get me through to payday," said Phyllis Ganey who manages Ace Title Loan in Mobile. Ganey will tell you there's a market for these type of loans that deal in quick cash, where no credit is no problem, " we have a place in you know in our community for very short term quick solution financial problems that people have on a daily basis and mainly its because of unexpected expenses," said Ganey.

This is how it works: Alabama law only allows a customer to take out maximum of $500, and legally the lender can charge you no more than $17.50 for each$100 borrowed. So that means, if you take out $500, you'll be charged $87.50 and you'll have 31 days to pay off your debt.

But, we found one pay day loan company advertising in the yellow pages that wants to charge you $25 per $100 borrowed.The State of Alabama says that's illegal. They may advertise here, but they operate in Nevada. We called CashBack Payday Loans, but our calls were not returned.

So, what's being done to protect you the consumer? We took that question to the State Banking Department in Montgomery. The State says it was not aware of the problem until we brought it to their attention, "that is illegal and certainly you know if that's the case then they'll probably face some kind of penalty," said the State Superintendent of Banks, John Harrison. Harrison says they have notified CashBack payday loans that they must appear in Montgomery for a hearing.

In the meantime, our investigation has prompted the Banking Department to make some changes with payday loan accountability, "maybe we going to try to get us an intern or something to maybe go through and take the metro yellow pages and try to scan out and make sure that they're not others like this that are not licensees that are preying on our folks," said Harrison, " probably if you had not said I don't know that we'd ever talked about hey lets go through the yellow pages and see if there's anybody out there lending money that's not licensed with us, no we probably didn't ."

The payday loan business that Ganey manages is part of a non-profit group called Borrow Smart Alabama. We're told the group is made up of payday loan companies throughout the State who are devoted to educating customers about responsible borrowing.

As for the payday loan company that the State says is doing business here illegally, the State Banking Department says they may settle with CashBack Payday loans by either making them get a license to do business in Alabama, which would mean they could only charge customers what is legally allowed here or they will have to withdraw their business from the State.

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BakerStreetMuse Says:

Wed, Dec 17, 2008 at 2:31 pm

My question is: If payday loans are scrutinized and monitored so closely by the State Banking Department, why do they allow companies like CashCall to operate within the state? CashCall charges a whopping 99% APR and if you make their recommended payments, if takes 7 years to finally pay the loan off while the company “earns” more than $15,000.00 interest on their standard $2,600.00 dollar loan!!! Did someone say, “USURY”???

Payday Lending Rep Says:

Tue, Dec 02, 2008 at 4:51 pm

CFSA is the national trade association representing responsible payday lenders. With membership representing more than half of the payday advance outlets nationally, CFSA promotes laws and regulations that protect consumers while preserving their access to credit options. The association also works on behalf of members to support and encourage responsible industry practices.

We have worked with policymakers in 35 states to provide responsible regulation that protects consumers and their access to credit. In addition, CFSA members must abide by a set of Best Practices , including the requirement to offer an extended payment plan at no charge to customers who cannot pay back the loan when due.

In a state-regulated environment, payday advances can often be the best choice for consumers. Customers use payday advances to cover small, unexpected expenses between paydays. They are people who have a bill to pay today and choose between bouncing a check or paying overdraft fees, late bill…

Doglover Says:

Tue, Nov 25, 2008 at 3:40 pm

I would not recommend them to anyone. You have to make sure that you can pay it off on payday and not keep reloaning. My sister got one thinking it would be a quick fix. I am now trying to do some research on them in Alabama to help her get out of it.