Mountain America Credit Union had offered its 320,000 member-owners a “MyInstaCash” loan that topped out at an 876 percent annual interest rate for a $100, five-day loan.

These short-term, unsecured loans are usually due when the borrower receives his or her next paycheck. Consumer groups say lenders charge exorbitant interest and often trap borrowers in a cycle of debt that they can’t escape.

The credit union’s new loan, called “Helping Hands,” as described by a loan officer in a phone call, appears to comply with rules set by the National Credit Union Administration. The rules permit federal credit unions to lend at a maximum 28 percent annual rate provided they follow certain guidelines, such as giving customers more time to repay the loan.

Mountain America, a large credit union with $2.8 billion in assets, is one of several that skirted the interest-rate-cap rule by partnering with third-party lenders that financed the loans. Customers were directed to these lenders through a link on the credit unions’ websites.

Those lenders would then turn over a finder’s fee, or a cut of the profits, to a separate business, set up by the credit union.

The third-party lender that backed Mountain America’s payday loans was Capital Finance, LLC, located just a few miles from Mountain America’s headquarters in a Salt Lake City suburb.

But Mountain America wasn’t just a client of Capital Finance. It was also — at least as of this past spring — a business partner.

In a telephone interview in April, Capital Finance executive David Taylor said that Mountain America and another large Utah credit union, America First Federal Credit Union, are part owners along with Capital Finance of “CU Access” — another payday product for credit unions (CU Access appears to make loans that comply with federal guidelines).

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One of the biggest new laws is an increase in the state’s renewable-energy standard to 30 percent for large public utilities, such as Xcel Energy.

Currently, power companies are required to get 20 percent of their electricity from such renewable sources as wind and solar by 2020, but the larger producers said they were likely to hit that mark far sooner than initially thought.

As a result, Gov. Bill Ritter and some Western Slope senators introduced House Bill 1001, which primarily emphasizes solar, and lawmakers said it will lead to the installation of about 100,000 new solar rooftops during the next 10 years.

“These are high paying jobs that will stimulate economic activity in our local communities and can’t be shipped overseas,” said Sen. Gail Schwartz, D-Snowmass Village, who introduced the bill with Sen. Bruce Whitehead, D-Hesperus. “This change will bring jobs in wind, solar, biomass, natural gas, hydro and geothermal to our state.”

The standard was first created under Amendment 37, which voters approved in 2004. Three years later, the Legislature increased the standard to 20 percent by 2020 for power suppliers, and included a new 10 percent standard for rural electric cooperatives.

Republican lawmakers said the increase was an unnecessary mandate on business, but Xcel officials supported it.

Republicans also protested another controversial new law that narrowly won legislative approval. Under HB 1351, payday-loan companies will be limited to charging a monthly maintenance fee of no more than $7.50 for every $300 loaned, capped at $30 a month. The measure also limits the companies from offering new loans to customers for 30 days.

Currently, payday lenders are allowed to impose finance charges anywhere from 300 percent to 500 percent measured as an annual percentage rate. The new law limits that to 45 percent. The companies are limited to lending no more than $500 in loans, which are designed to be paid off within a few weeks.

“We want to protect hard-working families from predatory lenders who trap borrowers into a vicious cycle of debt where they face 300 percent interest rates,” said Rep. Mark Ferrandino, D-Denver. “That’s wrong. Any responsible lender would be satisfied with a 45 percent APR cap.”

Meanwhile, a couple of Western Slope lawmakers were pleased to see their measures become law.

Rep. Kathleen Curry, unaffiliated-Gunnison, will see HB 1238 cut down on the amount of roadkill and save motorists’ lives.

Under the new law, the Colorado Department of Transportation is allowed to lower speed limits in certain parts of the state where animal crossings are common, but it’s limited to designating wildlife crossing zones to no more than 100 total miles of highway.

The new law, which doesn’t include interstates or county roads, call on CDOT to clearly mark when the new zones begin and end. Fines for speeding also would be doubled in the zones.

Rep. Steve King, R-Grand Junction, will see two of his measures become law this week.

HB 1054 requires the state’s colleges and universities to establish procedures to deal with emergency situations, such as a campus shooting, and to ensure students know what to do in case such an emergency happens.

The other new law, HB 1334, moves the crime of public masturbation from the state’s public-indecency statutes to the more serious public-exposure laws. At the same time, it moves such nonsexual acts as urinating in public or streaking from the exposure statutes and puts them under indecency crimes.

King said current law has caused some people to be categorized as sexual offenders when they just did something stupid, and actual sexual offenders were getting slaps on the wrist.

“It seems appropriate to me to be able to free up resources for law enforcement and their focus to be out there looking for the true sexual predators, and not people (who) through intoxication or just bad judgment end up urinating in public and end up on a sex-offender registry,” King said. “Nine out of 10 people are going to say, ‘That’s not a sex crime. That’s just being stupid in public.’”

Nevada citizens are receiving telephone calls from persons claiming to be from the “Federal Government of Crime and Prevention,” “Affidavit Consolidation Services,” “Criminal Bureau of Identity,” “US Justice Department/Payday Loan Division,” “Federal Investigation Bureau,” and other fake governmental names.

The caller claims that a debt is owed on a payday loan such as “Advance Cash USA” and other fake companies. The callers pose as lawyers, law enforcement officers, investigators or Federal agents. They refuse to disclose their real names and addresses, claiming that such information is “confidential.”

They use scare tactics such as claiming they are filing a lawsuit or will take action to put the called party in jail. They sometimes call people at their place of employment.

This operation is a scam, probably operating outside of the United States. One consistent pattern the perpetrators follow is frequently changing telephone numbers and using various area codes, which is indicative of internet telephone number usage from outside the country.

If you receive such a call, simply hang up. If they call again, hang up again.

Regardless of what information they may give you over the telephone, this is a scam and the caller is just trying to scare you into wiring money to them which you do not owe.

And while the exact rules are far from concrete, opponents of payday lenders say any additional oversight on what they describe as high-interest, often predatory loans will be a plus. From there, some say, Texas lawmakers need to be the ones stepping up to protect consumers.

Proponents of short-term loan options say they’re not opposed to reasonable rules, but that they don’t want to be regulated to the point they can no longer offer a financing option that, while not traditional, is in high demand.

“It’s a legitimate industry … it’s one that provides a needed service to thousands of Texas consumers who would have no other place to go for financial products and services,” said spokeswoman for industry interest group Consumer Service Alliance of Texas Julie Hillrichs.

Such loan centers — which in Texas aren’t subject to standards of other lenders because they operate as credit service organizations — will eventually be regulated by the Consumer Financial Protection Bureau. The oversight organization was created as part of the Dodd-Frank financial reform legislation and still is awaiting the appointment of an agency head as well as additional parameters of what precisely it will enforce in each industry.

“There’s still a lot that needs to be flushed out,” said Ann Baddour, senior policy analyst with Texas Appleseed, which is a public interest law center. “They’re going to issue regulations defining the terms, there’s a lot that’s going to have to happen before the bureau is up in running.”

Ultimately, she said, while federal regulation will help, the state should be the one taking the lead in regulating the industry that she said charges interest rates as high as 500 APR.

“We have problems we as a state can do something about,” Baddour said.

Spokesman for the Community Financial Services Association of America (CFSA) Steven Schlein said they hope regulations will be similar to the CFSA’s best practices agreements, which includes things such as limiting rollovers and a commitment to transparency in loans. The CFSA works to preserve consumer access to short-term credit options.

“Our industry has always supported consumer regulation, not arbitrated rate caps,” Schlein said.

States like Arizona that have enacted rate caps on payday lending type businesses, he said, have driven out much of the industry since rules were enforced, which leaves few options for consumers who need short-term financing and don’t necessarily have access to more traditional loans.

Some Texas legislators pushed for similar rate restrictions in 2009. A bill filed by state Rep. Tom Craddick, R-Midland, as well as Senate bills filed by Sen. Eliot Shapleigh, D-El Paso, worked to limit the ability of credit service organizations to offer loans through car titles, post-dated checks or an authorization to debt by essentially fixing the regulation loophole tunder which they now operate. An interest rate cap of 36 percent also was proposed in some of the bills that failed.

The federal government already imposes a 36 percent interest rate max on short-term lenders when dealing with military families. Advocates argue the same standard would be a fair way of allowing short-term lenders to continue operating without putting consumers at risk.

Such issues could come up in the Legislature again.

“There are several interested groups and individuals looking to propose a bill to address payday loan lenders, also known as credit service organizations. During the upcoming legislative session, I believe that the Texas Legislature will have the opportunity to consider legislation addressing this issue similar to the bill I filed in 2009,” Craddick said in a statement.

Hillrichs said they look forward to working with lawmakers.

“The industry has said from the very beginning that we are not opposed to reasonable legislation and regulations,” she said.

Baddour, who spoke to a group of payday lending opponents in Midland last year, said short-term loans typically are utilized by single moms and low income families, who unfortunately get caught in a cycle of high payments because most can’t repay the full amount of their loan within the typical two-week period.

The average borrower, she said, ends up paying $840 for a $300 loan. With most requiring only an ID and a car title to grant loans, Baddour said until rules are added, they’ve been working to educate people on the financial implications of taking out such a loan.

If short-term lenders went out of business, though, Schlein said, the people they lend to would be bouncing checks and missing payments for other bills.

State and federal truth-in-lending statutes require lenders to disclose the true cost of credit in the form of an Annual Percentage Rate (APR) prior to the actual extension of credit.  However, internet payday lenders typically advertise fees as a dollar amount rather than an APR.  This may be misleading to consumers in determining the actual cost of the payday loan.  The Division’s survey of internet payday lenders found that APRs typically ranged from 300% to 500% and in one instance as high as 3,042%!

The Division of Banks strongly urges potential internet payday loan customers to educate themselves about the risks and responsibilities involved in these types of loans.  Many internet payday lenders provide little or no identifying information about themselves.  Because these companies are not licensed by the Division, they are subject to little or no regulation.  Unlike a bank, credit union, or a Massachusetts licensed lender, consumers may have little or no recourse should they run into trouble while doing business with an unlicensed internet payday lender.

Link: http://www.mass.gov/?pageID=ocaterminal&L=5&L0=Home&L1=Consumer&L2=Banks+%26+Banking&L3=Loans+%26+Mortgages&L4=Education+%26+Consumer+Alerts&sid=Eoca&b=terminalcontent&f=paydayloans&csid=Eoca

July 19, 2010

Many consumers and consumer advocacy groups hailed last week’s final passage of the financial reform bill, even though it wasn’t as strong as some would have liked.

Taking a completely different view, however, is the payday loan industry, which for the first time will fall under federal regulation. One company, Pay1Day.com, says it and its employees are worried that the Consumer Financial Protection Agency (CFPA), created under the new law, will put them out of business.

Why? Because the political backers of the new agency have vowed to put caps on interest rates for short-term loans. This new federal oversight also comes at a time when various states are cracking down, the company complained in a press release.

“For example, the State of Arizona recently banned payday loans, which forced many payday lenders, like Solomon Finance, out of the state,” Pay1Day.com said in the release.

The company says banning payday loans and having to shut down business resulted in thousands of citizens losing their jobs in the state.

The company quotes Gabe Rodriguez, who it identifies as “an author for a website that writes about payday loans,” as saying “States that have allowed regulated payday lending have very few complaints against our industry.”

But there are indeed many, many complaints about payday lenders.

“I have paid these people so much money you would not believe,” Sandra, of Fuquay Varina, N.C., wrote in a complaint about OneClickCash.com to ConsumerAffairs.com. “I think a law should be made to do away with these companies.”

Monique, of Chicago, learned just how easy — and expensive — it can be to fall behind when she took out a loan from a PLS Payday Loan Store.

“I took out a loan for $900 and made two or three payments on it of $227,” she told ConsumerAffairs.com. “The following payment I was unable to make so I went into the store to see what can be worked out. My options were not good. I was given the option of paying the difference and refinancing the loan for a larger amount and losing what I have paid already or paying it all off at a lump sum of $1,200 or let them take me too collections.”

400 percent

When a consumer takes out a payday loan, typically for a small amount of cash, he is charged a fee that can amount to 400 percent or more. The loan must be paid back within a two-week period. The Center for Responsible Lending (CRL), one of the biggest opponents of payday lending, calls it legal loan sharking.

“Payday loans are marketed as a way to put quick cash into your hands when you have a budget shortfall, but the business is designed so that borrowers can’t easily pay off their loans and walk away,” the group says on its website. “The average borrower has nine repeat loans per year, and at $50 each time for a loan of $300, that means they’re paying more in interest than what they borrowed.”

But Pay1Day.com complains that the new financial reform law is not addressing the root causes of what led the U.S. economy to collapse in 2008.

“It was well documented and evident that subprime mortgages, the major wall street banks irresponsible lending, and the greed of CEOs and CFOs of those banks and financial institutions were the causes for the deep recession of 2008,” the company says.

Read more:http://www.consumeraffairs.com/news04/2010/07/payday_loans_finreg.html#ixzz0uR8PR9qT

July 22nd

A Nevada company that used interactive websites to make payday loans has agreed to refund West Virginia consumers a total of $305,446 to settle a lawsuit brought by the state attorney general‘s office.

Payday loans typically charge high interest rates for short-term loans — rates that can add up to 600% to 800% in annual percentage rate. A borrower who can’t repay the payday loan and interest quickly digs a financial hole when then loan is renewed, which combines the original loan and interest with even more interest payments. The nonprofit Center for Responsible Lending estimates payday loans cost U.S. consumers $3.4 billion each year.

In West Virginia, payday loans are illegal and FFD Cos. agreed — while denying any wrongdoing — to refund 576 consumers for fees and interest for payday loans made over the Internet. The settlement closes a lawsuit brought by the state in November.

“Payday loans are not solutions but treacherous traps that can lead to financial ruin for the many West Virginians facing difficult financial circumstances,” state Attorney General Darrell McGraw said in a statement.

The settlement involves eight corporations under FFD, with offices in Delaware, Georgia, New Mexico, Nevada, Texas and Utah. Included are FFD Ventures; DFD Ventures; First Fidelity Inc.; FFD Resources, doing business as Cash Supply; FFD Resources II as Web Payday; FFD Resources III as Payday Services; FFD Resources IV as Payday Yes and Paper Check Payday; and Great American Credit Management.

The U.S. Federal Trade Commission describes payday loans as very expensive credit. Federal law requires payday lenders to disclose the loan’s cost including the finance charge and annual percentage rate before consumers sign for loans. The FTC recommends consumers look at other types of financing before turning to a payday loan, including:

• A small, short-term from a credit union, small loan company or banks. A community organization may also make small business loans. Shop around for the best interest rate before settling on a loan offer.
• A cash advance on a credit card. While this option may carry a higher interest rate than other cash sources, it still may have lower rates and costs than a payday loan.

Link: http://www.walletpop.com/blog/2010/07/22/payday-loan-company-to-refund-w-va-consumers/