“This is the same old rip-off we ran out of our state years ago. These overpriced loans trap borrowers in a cycle of debt many cannot escape. Payday lending was a bad idea then, and it’s a bad idea now.”
Cooper fought in court for years to chase payday lenders out of North Carolina. A bill filed yesterday in the N.C. Senate would allow payday lenders to open up shop again in the state, charging excessive interest rates on loans that must be paid back quickly.
Senate Bill 89 would amend the Check Cashing Licensing Act to allow a check casher/lender to pay out cash loans of up to $500 for a fee of 15 percent of the cash advance. On a typical loan repayable in two weeks, the annual percentage rate would be more than 300 percent.
Current state law allows a maximum rate of 16 percent on consumer loans under $25,000 except that licensed consumer finance lenders can charge up to 36 percent on loans under $600. The bill would not allow payday loans to be made to military personnel or their spouses. Congress already banned payday lending to military personnel in 2007 to protect service members from these predatory loans.
In the late 1990s, payday lenders expanded rapidly across the state. Many North Carolina consumers who took out payday loans saw their debts mount quickly when they were unable to find the money to repay their original loan in such a short period of time.
After legislators outlawed payday lending in 2001, some payday lenders closed their doors while others used a variety of ruses to keep operating. Cooper and the Commissioner of Banks’ office fought a long legal battle to shut down illegal payday lenders in North Carolina, winning agreements to close the last storefront payday lenders operating in the state in 2006.
Last year, Cooper became concerned about payday-type loans being offered by Regions Bank, which tried to claim protection under federal law because it is chartered in another state. Thanks to pressure from Cooper’s office and other consumer advocates in the state, the bank stopped making those loans in North Carolina last month.