Advance Payday Industry

Appeared in the Augusta, Georgia Chronicle

ANYONE TIRED of government’s constant assault on free enterprise can look to Georgia as the latest example where a legitimate industry is targeted for destruction.

Just because a few fly-by-night crooks are taking advantage of people with “payday” loans, some Georgia legislators, including Sen. Don Cheeks, R-Augusta, want a ban on all payday advance businesses that help countless low-income workers struggling with bills.

THE LEGITIMATE payday advance business started when banks began charging up to $30 for a bounced check. Businesses getting the bad check also began slapping on their own hefty fee. So, a single bounced check is costly to folks who live paycheck to paycheck.

To avoid bounced-check fees, and especially if a bill is due on one’s payday and the check may arrive late, a payday advance company can be a temporary financial lifeline. After all, that same person is probably not able to obtain money at a regular bank or loan company.

One Fitzgerald, Ga., woman interviewed in the Atlanta media – a single mother of two – used these loans for several hundred dollars on three occasions to take pressure off of Christmas bills. Each time was for a $34.50 fee.

“I don’t feel they are taking advantage of me at all,” Marcey Larkin was quoted as saying. Yet some lawmakers overreacted and seek to deny the Marcey Larkins of Georgia that option.

THE STATE SENATE in 2003 passed legislation to outlaw and severely punish any payday lender. The current version of Senate Bill 157 calls for 10 years in prison for a third conviction involving loans of up to $3,000. It also allows for a fine of $1,000, plus civil penalties equal to three times the interest and fees charged illegally.

The House Banking Committee is just as bad, recently toughening legislation with felony penalties designed to push such loans out of Georgia. (This legislation also challenges the legal authority of federally-regulated out-of-state banks currently offering the service here.)

Faced with this Draconian legislation, the industry simply wants reasonable government oversight to stop dishonest operators. Thirty-five of the 50 states regulate it. Why not Georgia?

IN FACT, A bill by state Rep. Earl Ehrhart, R-Powder Springs, seems reasonable in this direction. An outright ban, by the way, will only make banks richer from bounced-check fees and force more low-income people to pawn shops.

Finally, let’s remember that payday advance businesses are no different than credit card companies. The bottom line remains education and self-discipline for those who use the service.

(Editor’s note: The writer is an Atlanta political/media consultant and author of The Dark Side of Liberalism.)