Saturday, December 24, 2005

Payday part II

Earlier, I posted about the issue of payday loans, those loans at big interest rates that serve/take advantage of (take your pick) people with no credit or bad credit. Of course, since the banks that supply these credit lines take larger risks of not being paid back (very big risks), they charge higher interest rates. The issue is what is the threshold between high interest and predatory interest.

North Carolina recently struck a blow against how a payday lender is defined. From the Associated Press:
The nation's largest payday lender will appeal an order by the state banking commissioner to stop doing business in North Carolina, a company lawyer said Friday.

Commissioner Joseph Smith Jr. wrote Thursday that Advance America was in the lending business, rather than simply an agent for out-of-state banks as it had argued. The company violated consumer lending laws by taking in fees at its 117 outlets on loans with effective annual interest rates of more than 400 percent, Smith determined. State law caps interest rates on small loans at 36 percent.
Ouch. It remains to be seen whether this decision will be upheld as the case makes it way through the appeal courts. But it should. - P


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