By Patsy Brumfield / NEMS Daily Journal
Both sides of the payday lending issue will get a say Jan. 10 when the state House’s Banking and Financial Services hosts a hearing.
Central to the discussion is reauthorization of the 1998 Check Casher Act, which allows registered, non-bank lenders to loan money shortterm for a fee.
Reps. Jerry Turner of Baldwyn and Gary Chism of Columbus predict change is afoot.
“We don’t want to put them out of business,” Chism said last week, “but we don’t want to be predatory either.”
Turner said he can’t understand why competition has not corrected the problem of high interest.
“It is not good that Mississippi is the highest rate in the South,” he said recently. Mississippi’s rate is capped at 18 percent for two weeks, compared with Alabama at 17.5 percent for 10-31 days, Louisiana at 16.75 percent for 60 days and Tennessee at 15 percent for 31 days. Arkansas capped the fee at a 17 percent annual rate.
Both men are members of the House committee, whose chairman, Rep. George Flaggs of Vicksburg, has called the hearing less than a week after the 2011 legislative session begins.
“I welcome this public discussion,” Flaggs said last week. “I believe we’ll come out with a better product.”
Mississippi is home to nearly 1,000 payday lenders. Dan Robinson of Flowood, an industry spokesman, said the average state payday loan is $235 with a payback of $287.
Typically, Mississippi payday lenders charge about $21.95 to loan $100 for two weeks.
The Mississippi Banking Commission reports that nearly 380,000 payday loans were issued during 2009.
Sen. Gary Jackson of French Camp, chairman of that chamber’s Business and Financial Institutions Committee, told the Daily Journal earlier this month that he hopes Flaggs will allow his committee to participate, too, instead of hosting two similar meetings. Rep. Lester “Bubba” Carpenter of Burnsville said he understands the risk payday lenders take with customers, but he’s also open to looking at industry fees to bring Mississippi into better competition with its neighbors.
In the meantime, consumer advocacy groups are mounting campaigns to focus on changes to the bill, which will expire July 1, 2012, if it’s not reauthorized.
They insist the industry in Mississippi is allowed to charge customers the annual equivalent of 572 percent interest. That’s calculated this way: Fee ($21.95) divided by the amount financed ($100) times 365 divided by number of days of loan (14) equals APR (572 percent).
The payday lending and check-cashing industry defends itself, saying its services are needed and the industry needs to make a profit.
Jamie Fulmer with Advance America in Spartanburg, S.C., the nation’s largest payday lender, says it’s incorrect to talk about its fees in terms of annual percent interest.
“Typically, a payday customer takes out a two-week loan,” he said. “To get that kind of interest, you’d have to take out the same loan every two weeks for a year.”
Chism said he laments that local banks aren’t interested anymore in making the small loans that people need sometimes to tide them over during a difficult financial situation.
Stacy Whitten, who works at City Check Advance in Tupelo, said her business sets a loan cap at $300 and charges a $60 fee for a two-week payback.
She also said her store offers an education program for potential lenders about making good financial decisions.
Flaggs said his own research shows that frequent customers to payday lenders are school teachers, state employees and local firemen and police officers – people who get paid every two weeks and haven’t had a pay raise in years.
“These people are just trying to survive,” Flaggs said. “To some folks, going to a payday lender beats paying a $39 bank overdraft or a reconnection fee to have the lights turned back on.”
He said he regrets hearing that some $100 payday loans are used at the casinos to make more of their $121.95 back. “It may happen, but sometimes it doesn’t.”
Mississippi’s neighbor states have set payday loan maximums from $350 in Louisiana to $500 in Alabama and Tennessee. Their interest rates range from 10 to 17.5 percent.
Elsewhere in the South, Georgia and North Carolina outlawed payday loans.
Fulton’s Luke Montgomery, who owns payday lending stores in Northeast Mississippi, said that setting a 36 percent cap, as he’s heard discussed by reform advocates, would seriously hurt his business.
“Such a rate applied to a twoweek loan translates to $1.38 cents on every $100 borrowed, which would cut my store revenue by 93 percent,” he said in a letter to the Daily Journal last week. “Ask any businessman if they could take a 93 percent hit on their company’s operating revenue and still keep paying their employees, and the answer will be the same: adamantly, no.”
Fulmer termed a 36 percent cap “a deal killer,” which he figures put income at 7.5 cents a day on a $100 loan.
“We’re willing to sit down and improve the product for the consumer,” he said about potential legislation in Mississippi.
But for now, the issue moves to the Legislature. Both sides will be lobbying these legislative committees, where bills can live or die.
A look at the past three year’s campaign finances shows the payday and title cash industry has given nearly $30,000 to Northeast Mississippi House committee members.
Topping the list is Turner at $13,950, followed by Carpenter with $7,855, Chism at $3,900, Rep. Margaret Ellis Rogers of New Albany at $1,600, Rep. Preston Sullivan of Okolona with $1,300 and Rep. Harvey Moss of Corinth with $1,000.
Rogers, Sullivan and Moss could not be contacted for their views on the issue.
Flaggs said he supports expanding the loan’s payback period and wants more education about personal finances.
Advance America’s Fulmer, who said he’ll be at the Jan. 10 hearing, says he believes his industry will be ready to “sit down and look at the real world needs, and then try to address that.”