Payday Lending

Not in our state

Payday lending was never legal in Georgia. But the penalty for offering payday loans was never harsh enough to deter lenders, nor did it give the police much incentive to enforce the law.

That all changed in May 2004 when Governor Sonny Perdue signed into law the nation’s strongest protections for consumers against payday lenders.

Payday loans are short-term loans that lack traditional barriers – such as credit checks – and instead allow borrowers to use post-dated paychecks as collateral.

Before Georgia’s anti-payday law was signed, payday lenders regularly ensnared working Georgians, single parents, teachers and police officers in a straightjacket of debt. Even worse, these businesses clustered around military bases and in poor neighborhoods, taking from the tables of Georgia’s neediest families.

Business is good in the payday lending industry. For example:

* There are approximately 10,000 payday outlets nationwide.
* Payday industry revenue, which was less than $1 billion in 1998, reached $28 billion last year.
* The Center for Responsible Lending estimates that a typical payday borrower ends up paying back $793 for a $325 loan.
* Fort Worth-based Cash America International Inc. reported in October 2006 that its third-quarter net income jumped 35% from a year earlier, to $12.94 million. The third quarter was the twentieth in a row that Cash America has reported an increase in net income above 20%.
* Advance America was founded in 1997 and is the country’s largest provider of payday cash advance services through roughly 2,750 centers in 36 states.

Just because Georgia has strong legislation outlawing payday lending, the payday industry isn’t sitting and nursing its wounds. In 2007, payday lenders from out of state came to Georgia to push House Bill 163, which would have repealed Georgia’s groundbreaking 2004 law and opened the door to triple-digit interest rates and predatory debt traps. Fortunately, the bill was voted down on the house floor. But don’t be surprised if the lenders return next year with a similar bill in tow. Payday lenders made a fortune in Georgia before lawmakers kicked them out. Nationally, payday lending has grown into a billion-dollar industry, characterized by harassing collection tactics and dishonest marketing schemes. It’s almost assured that industry leaders will lobby for a return to the Peach State.

We can’t let that happen. Georgia’s new payday lending law has changed the business of short-term loans for the better and forced payday lenders and their “fast cash” loan schemes out of the state.

Legalizing or “regulating” payday lending would reverse current consumer protections and leave many Georgians vulnerable to overwhelming interest rates and loan rollovers. Rolling back the state’s payday ban would be a step in the wrong direction and would hurt Georgia families.

Other states have attempted to regulate the payday lending industry, with disastrous consequences. You can read about it here, in Georgia Watch’s report, Don’t Fix What Ain’t Broke: The Payday Lending Ban in Georgia Works.