The American Banker discusses a payday lending “alternative” offered by the Citizens Trust Bank of Atlana.  Of course, there’s no payay lending in Georgia.  And there’s no discussion of the fees and costs of this loan.

From the story: 

Others are turning to them to find quality merchandise at a good price.

At Dawson Road Pawn in Albany, TV’s, guns, laptops and jewelry, are some of the hottest selling items.

“The main reason is people are obviously needing money,” said Dawson Road Pawn Asst. Manager Adam Gilbert.  ”And this is an easy way to come by it and get the quick cash, not have to go to a bank and worry about a big financial charge or anything like that so they just come by here and it’s a pretty easy transaction to do.”

 One person’s misfortune, may turn into a fortunate find for others. As the economy struggles to recover, many people are turning to Pawn Shops to make quick and easy money.

And it’s drawing heat.  From the Atlanta Journal Constitution:

Battle lines are being drawn in Snellville over a proposal by a local pawn shop owner to relocate and build a 5,500-square-foot facility on U.S. 78.

Why don’t they let payday loans back in Georgia and create a little competition.

The Atlanta Journal Constitution weighs the pros and cons of federal legislation on payday lending.   We liked the con piece by CFSA’s Tommy Moore: 

The effort to kill the payday lending industry is being spearheaded by two top lawmakers in Washington, D.C.

Rep. Luis Gutierrez (D-Ill.) has introduced legislation in the House that would make many payday lending stores across the United States unprofitable by setting a national cap on all payday loans at $15 for every $100 borrowed.

In the Senate, a bill has been introduced by Sen. Richard Durbin (D-Ill.) that would essentially close every payday lending store in the United States.

The senator’s legislation enforces a 36 percent APR for all loans.

This means payday lenders can only charge $1.38 per $100 borrowed over a two-week loan. A fee so low it will put stores out of business.

Even if our critics don’t.   From the Atlanta Journal Constitution: 

Another bill — Senate Bill 130 — would quietly allow resumption of payday lending, a predatory practice banned five years ago. In its “lease-back” incarnation, payday lenders could make loans with triple-digit interest rates that were secured not by future paychecks but by refrigerators and stoves. (When the world ends, the only survivors will be cockroaches and payday lenders. They have demonstrated incredible adaptability and agility to reinvent themselves and coax legislators to carry their banner. The lenders, that is, not the cockroaches.)

Yea, but it’s newspapers, not payday lenders, that are on the endangered species list.   It would be funny if some of these editorial writers that lose their jobs in the coming years need to take out a payday loan.  Or better yet, take a job at a payday loan store.

“Overdraft protection” is just a payday advance.   From the Atlantic Journal Constitution:

Georgia lawmakers shut down the state’s payday lending industry in 2004.   But consumer advocates say large banks statewide are making similar short-term loans at astronomical interest rates. They just call it something else: an overdraft charge.

When a consumer swipes a debit card on an account with an inadequate balance, banks usually extend the money these days instead of declining the withdrawal. In return, the bank charges the customer a fee that is deducted — along with the amount overdrawn — when the next deposit is made.

How about giving consumers a choice?

The Los Angeles Times story from last week about the middle class using payday loans more and more is getting pickup in other papers.  Today, it’s in the Atlantic Journal Constitution.

Update:  A reader alerted us to this pickup of the story in the Boston Globe.

Terry Kibbe of the Consumers Rights League has a guest piece today in the Denver Post that picks up on recent research by Don Morgan of the NY Federal Reserve. 

Money quote: ”Morgan also questioned the validity of the research from the Center for Responsible Lending saying the Center ‘overstated the number of problem borrowers.’ He noted that banning payday loans actually leads to more people bouncing checks, filing for bankruptcy and fighting with collectors. After payday loans in Georgia were banned in 2004, Morgan found, “bounced checks in the Fed processing center in Atlanta jumped by 1.2 million, a 13% increase.”

The report from staff researchers at the Federal Reserve Bank of New York is continuing to pick up steam. 

As states look at consumer credit issues it’s important that they look at the facts and carefully examine the real impacts of legislation.    The Federal Reserve staff study does just that and finds that one of the unintended effects of such legislation, which we see in states like Georgia and North Carolina, are increased credit problems for consumers.

To ignore what is already happening to individuals in states without payday lending and to continue on an assault on an industry which provides a better option for many in a short-term credit crunch is foolish and damaging to consumers.  Legislating payday loans into fee structures which are impossible to operate under extinguishes consumer choice.  We already see that individuals are forced to turn to more costly credit options when payday loans aren’t available.

The Open Markets Blog of the Competitive Enterprise Institute took note of this and posts on the report.  Kudos for highlighting this important piece of research.