It’s not just the UK that has payday lender headaches


Payday advance companies certainly run roughshod over Brits on a regular basis, but it’s no picnic for our cousins form across the pond, either!

In fact, not one but two news stories from the US indicate that they’re up to their eyeballs in the tender ministrations of payday loan providers. Considering that payday lenders are much more tightly regulated over in the colonies than they are here, it seems that Americans shouldn’t have much to complain about, but apparently payday loan companies are poor sports regardless of what port they operate from.

The great state of New York in particular has had enough of payday lending debt collectors, with Governor Andrew Cuomo remarking that it’s time to send these collectors packing. Governor Cuomo remarked recently that the state’s Department of Financial Services has alerted via post debt collectors operating within New York that they have no legal right to collect on the loans and are in fact breaking state law by doing so, especially since the criminal usury laws of the state prohibit any lending rates over 25 per cent.

Annualised rates for payday loans in the US can run as high as 400 per cent, which is indeed chump change for someone here in the UK suffering from a 4,214 per cent APR loan from someone like Wonga. I’ll wager that if someone tipped off the good Governor concerning the disparity between UK and US payday lenders and the rates they charge, his head would positively spin!

Meanwhile, the state of North Carolina – an early pioneer in stamping out payday lending by outlawing the practice within its borders 12 years ago – is coming under fire from renewed pressure to allow short term lending once more. Special interest groups in the Tar Heel State are pushing hard for the return of these legalised loan sharks, and lobbyists have several state legislators in their deep, well-lined pockets, I’m disappointed to report.

Pat McCrory, the governor of North Carolina, has yet to say whether he’ll support or oppose the plan, though he has campaigned on a promise to treat businesses wishing to operate within he state with sympathy and support. The North Carolina General Assembly has many state representatives that support such a plan in the hopes that it will encourage economic recovery by turning the state into a place where businesses of all types are welcome, but for what it’s worth this truly sounds like an absolutely terrible plan to me, considering the havoc payday lenders regularly wreak on household finances – especially low income earners.

Still, it may not be a terrible idea at least in North Carolina, as proposed legislation would cap interest rates at 15 per cent for loans $500 or less (about £325). Again, this is far and above better than the kind of rates you can end up paying in the UK, so as long as these types of loans stay well-regulated perhaps it won’t lead to nearly as much financial ruin across the pond.

Supporters also say payday loans offer a reasonable, government-regulated option for people desperately in need of cash with nowhere else to turn. Consumer advocates say the loans and fees can trap consumers in debt as new loans are borrowed to replace old ones.

The average customer of leading payday lender Advance America takes eight such loans in a year, according to the Spartanburg, S.C., company’s annual report.

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