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Payday lenders hope to return in Georgia

March 18, 2007 - Atlanta, Georgia When the Georgia General Assembly opened for business in January, representatives of the payday lending industry walked in the Capitol's door, eager for another battle.

For the industry that extends a few hundred bucks until a worker's next payday, the return to Georgia was a bold move. Three years earlier, lawmakers handed the high-interest lenders one of their worst defeats ever by passing a bill that shut down every payday lending outfit in the state.

The industry suffered millions in losses. Advance America alone, the nation's largest payday lending chain, shuttered 89 Georgia stores after passage of the 2004 law. Those outlets produced net revenues of $19.9 million in 2003, according to the company's public filings.

Battered by the Georgia law and damaging regulatory decisions elsewhere, the payday lending industry has given itself a makeover to present a more consumer-friendly face. Last month, it kicked off a $10 million "public education" campaign.

"There is a huge need for this service," said Allan Jones, founder and chairman of Check Into Cash Inc., one of the nation's largest payday lending chains. "They can criticize it all they want to, but that doesn't change the need."

The industry says thousands of Georgians now cross state lines to take out payday loans.

Whether the industry has shed its predatory image will be tested this week at the General Assembly, when the House is expected to take up a bill to legalize payday lending.

The bill has gained traction in recent weeks. Jabo Covert, a Check Into Cash executive who has been heavily working the Capitol halls, thinks it is positioned to pass.

"A huge majority of legislators feel like they made a mistake [in 2004]," Covert said.

But consumer advocates are scoffing at the notion that people need payday lenders. "It's a business model that entraps people," said Sue Berkowitz of the South Carolina Appleseed Legal Justice Center.

The industry is thriving in South Carolina, where consumers took out 4.3 million payday loans between September 2005 and August 2006. The state now has more payday lending outlets than McDonald's franchises. Berkowitz said consumers are getting trapped in loans they can't pay off, and the South Carolina Legislature is considering a bill that would shut down the industry. Berkowitz has some stern advice for Georgia lawmakers: "Don't open the door. source:"

Lawmakers’ Involvement Leads to Suit Brouhaha

Frustrated consumers in South Carolina have filed suit against cash advance lenders who allegedly extend unconscionable personal loan products to vulnerable borrowers. They may feel that legal action is their only option, given the fact that the state Legislature failed completely in efforts to regulate or restrict the payday loans this year. Now, news that some state lawmakers have signed on to represent these consumers has sent shockwaves through the fast cash loan industry and its lenders. Because these are the same legislators that will reconsider prohibiting these personal loans when the General Assembly reconvenes in January, some have accused the thirteen lawmakers of a conflict of interest.

Lisa Johnson of Andrews and Gilbert Herbert of Clinton have filed suit against Advance America Cash Advance, the nation’s largest payday loan provider, which is based in Spartanburg, seeking “unspecified financial damages.” The Andrews/Herbert suit joins a handful of existing cases open against fast cash loan dealers in South Carolina. There has been an ongoing effort to consolidate some of these cases into one or more class action suits. The two plaintiffs are represented by Former U.S. Attorney Pete Strom, who announced that he planned to file at least three more suits in coming weeks. Strom denies that his involvement in the suit constitutes a conflict of interest, because “democracy is a slow process,” and wronged borrowers need justice in a timely manner.

Advance America spokesman Jaimie Fulmer insisted that the company runs “a legal and regulated business in South Carolina.” Fulmer questioned whether Strom’s involvement with the payday loan suit was in any way appropriate, given his legislative connections.

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