Georgia considers relaxing its ban on payday lending

And there’s always a handful of Georgians speckled in the crowd of hundreds who come to the office to repay the short-term loan they took out earlier in the month, Schooley said.

Payday lenders say thousands of Georgians drive to border towns like Anderson, S.C., Tallahassee, Fla. and Chattanooga each month because Georgia’s ban on payday lending has left an aching void in the short-term loan market.

Three years after the state’s lawmakers outlawed payday loans, lenders are now making their strongest effort yet to repeal the ban and replace it with a new system designed to regulate the high-interest loans.

Their solution lies in a thick proposal introduced by a few Republicans and a key Democrat.

The legislation would set up a system of “cash advances,” which are two-week loans prohibited by law from accruing interest from month to month. Under the plan, operators would charge a service fee of $15 per every $100 borrowed, up to 25 percent of a customer’s monthly income. And lenders who break the law would be fined $1,000 each day for each violation.

“People are driving 30 to 45 minutes. They tell us banks won’t lend a few hundred dollars,” said Lauren Hosie, director of legal affairs for Cleveland, Tenn.-based Check Into Cash, the nation’s third largest payday lender. “There’s a need that still hasn’t been met if people are crossing the border.”

The proposal has been met by stiff opposition from critics who say banning payday lending was one of the most aggressive ? and progressive ? acts that the Georgia Legislature has ever taken.

One of the proposal’s most vocal opponents is state Insurance Commissioner John Oxendine, a Republican who would oversee the financiers if the payday lending ban is lifted. He called the plan to repeal the ban “anti-consumer” and said there’s a dedicated, if small, number of legal lenders that specialize in loaning several hundred dollars.

“I’m not saying the companies pushing the bill are bad,” Oxendine said. “The key is, you have to have legislation written to the lowest denominator. You have to assume there are bad people out there.”

Consumer advocacy groups are also fighting the effort to repeal the ban. AARP lobbyist Kathy Floyd warned that it would be “letting the fox back in the hen house.” And Joe Mulholland, the south Georgia district attorney who used the law to prosecute lenders in the city of Bainbridge, worried that legislators could soon erase the “positive change in our communities.”

Georgia is the only state in the nation to specifically pass a law targeting payday loans, said Steven Schlein of the Community Financial Services Association of America, an advocacy group that represents the short-term lenders.

But the payday lending industry says the ban went too far, pushing out of the market any reputable companies that require customers to prove they hold a job and a bank account. Now Georgians who need a few hundred dollars must cross the border or turn to unregulated Internet lenders, said Niger Innis, a spokesman for the Congress of Racial Equality.