Payday lending closer to legal in Ga.

Payday lending closer to legal in Ga.

	Published : Fri, 23 Feb 2007 00:28 By : Agencies Print this Story

ATLANTA (AP) - Three years after they made Georgia the nation's only state to specifically outlaw payday lending, state legislators moved another step toward allowing a return of the high-interest short-term lenders.

A House committee approved a plan Thursday to relax the ban and create a system of loans designed to cap fees at $15 for every $100 borrowed. The full House could consider the measure as early as next week.

Why the sudden about-face?

Lenders say the ban went too far, forcing out reputable companies that require customers to prove they hold a job and a bank account and leaving a void filled by illegal lenders or murky Internet sites.

Opponents sniff that the lenders were outlawed because they trapped the neediest Georgians into an endless cycle of loans, and that relaxing the ban will roll out the welcome mat for crooked companies to return.

The new measure would ban the loans from accruing interest, but permit lenders to collect up to a $112.50 service fee on a $750 loan, the maximum loan allowed. It also bans lenders from rolling over loans from month to month.

The committee passed the measure by a 17-11 vote, but not before deciding to lengthen a 'cool off' period between loans from two days to five days. The measure passed over the objection of state Rep. Earl Ehrhart, an influential Republican, who warned that the move could be a 'poison pill' for the measure.

The legion of payday lending lobbyists in the packed committee room didn't seem to mind. They have been clamoring to return to Georgia since the ban was enacted, saying there's a growing need for their services from Georgians with credit so poor they can't turn to banks for emergency funds. They argue that the measure allowing their return is still one of the stiffest in the nation.

'We are asking for the most restrictive -- we call it humble -- bill so we can come back,' said Jabo Covert, a lobbyist for Check into Cash, a Cleveland, Tenn.-based lender. 'You can't stick your head in the sand and think that the demand went away, the customers went away and the need for short-term loans has vanished.'

With the good also comes the bad, warned Joe Mulholland, a south Georgia district attorney who used the payday ban to convict lenders on criminal charges.

'We are not dealing with companies that try to uphold the law,' he said. 'They are trying to go around the law anyway they can ... We are not talking about good, strong companies. We are talking about loan sharks.'

Consumer advocate Clark Howard, a syndicated radio host, told lawmakers Georgia is poised to loosen payday lending restrictions even as the federal government and other states are cracking down on the industry.

Last year, Congress imposed a 36 percent annual percentage rate cap on payday loans to military service members after reports showed thousands of troops in debt to payday lenders, many of which are clustered outside bases.

At least 12 states prohibit triple-digit rates on payday loans, a cap that effectively bans payday lending, according to Jean Ann Fox with the Consumer Federation of America. Dozens of other states are also considering legislation to ban payday lenders.

'Georgia's the only state I know of where payday lending is currently not legal and the Legislature is actively considering making it legal,' she said.