A South Carolina "payday" lender is running into obstacles in Arkansas:
A South Carolina company that had been making so-called "payday loans" from 30 branches in Arkansas says it will stop making bank-financed loans in the state.
Advance America had been using a federally regulated bank, First Fidelity Bank of Burke, S.D., to make loans in Arkansas. The bank was told last month by the Federal Deposit Insurance Corp. that it could no long provide funds to payday lenders, because the loans were too risky.
Apparently they are having difficulties in other states, too:
Advance America said earlier this month it would stop making similar loans in Pennsylvania. The company also suspended operations in North Carolina in December after that state's banking commissioner determined the company's high rates were illegal. Advance America has appealed.
It's good to see regulators taking a closer look at these operations.
Here in Tennessee there is legislation that would limit interest on payday and title loans to 36% APR in total instead of the current 24% and up to 20% of the principal in fees. Similar legislation in the last session would have limited the interest to 12% and 10% of the principle in fees, but it went nowhere.
There is also proposed legislation to require more extensive financial disclosures for payday and title loans to U.S. military and their families, and limit interest to 36%. Soldiers are frequent targets of predatory lenders.
36% sounds like a lot, but apparently it's the best state lawmakers around the South think they can get away with v. the powerful payday lending special interests. And these are frequently risky loans. But still. The usury limit in Tennessee is, I believe, 24% or four points above prime, whichever is less, and credit cards are limited at 21% interest.
For more information, the Institute for Southern Studies and Facing South have extensive investigative coverage of predatory lending practices in the archives.