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Where do politicians turn when they need a spot of cash? In the case of the Democratic Party of San Diego County, to Advance America, “one of the nation’s leading payday loan companies” that has “helped millions of hardworking Americans overcome financial challenges,” according to its website. The Spartanburg, South Carolina–based firm gave the party $1000 on August 18, according to a recent financial report.

A lot of states ban such lending operations, which allow clients to borrow against their next paycheck, and there’s a move afoot in Congress to impose a nationwide prohibition of the practice. The loans don’t come cheap. California law, which limits the amount of such transactions to $300 each from a given lending firm, currently allows the lender to charge up to 15 percent of the face value of a paycheck, while waiting two weeks to cash it, amounting to an average annual rate of 460 percent.

Customers tend to be lower-income workers living paycheck to paycheck who don’t have enough credit to get a better deal elsewhere. Ninety percent of industry revenue comes from those who have to roll over their loans every payday, says the Center for Responsible Lending, which wants to stop the practice. Advance America argues that the loans are a “dignified, transparent and responsible” way to get quick cash without “asking family or friends for money or risking personal items as collateral.”

The firm, which has 19 storefronts in San Diego County, is working both sides of the fence to advance its agenda in Sacramento. In May, it contributed $1000 each to Democrat Marty Block and Republican Joel Anderson, and on June 10, according to disclosure filings, it paid $21.36 to take Anderson out to lunch at Sacramento’s Lucca Restaurant. The firm spent a grand total of $19,628 in the second quarter of the year lobbying legislators regarding Assembly Bill 377, authored by Norwalk Democrat Tony Mendoza, which would raise the $300 loan maximum to $500, and AB 33, which would reorganize state lending regulators. On March 18, Mendoza got a dinner worth $75.92 at Sacramento’s McCormick and Schmick’s. Both bills are still making their way through the legislature. Reached this week by phone, county Democratic Party chairman Jess Durfee said there “was no clear reason for the contribution," which he said “came in unsolicited.”

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Comments

Robert Johnston Oct. 16, 2009 @ 4:40 p.m.

"Payday Advance"= Legalized Loan Sharking.

The normal practice in these operations is to have the customer write out a personal check for the amount dispensed in the loan--plus fees (including interest). The personal check is then held for two weeks before being presented to the customer's bank for payment.

Under California law, the "Payday Loan" folks cannot file "rubber check" charges against those who welsh out on that loan. However, the customer's bank can nail that customer for "non-sufficent funds" charges (and they do get steep) for each time the check is presented to them by the Payday Loan company.

Also, a lot of payday lenders do not give cash for that check to first-time users. They usually do a "check for a check" routine, in which the customer then has to go to a check-cashing place to get their money.

It's no wonder that the Department of Defense has declared Payday Loan companies "out-of-bounds" to their personnel. It's also a very easy way for those with little training in personal finance to get into a lot of trouble!

Instead of encouraging such places to do as they will, we need to regulate them much more closely. For in these troubles times, they spring up everywhere--only they are not useful plants, but noxious weeds that poison everyone they touch!

--RKJ

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PaydayLendingRep Oct. 19, 2009 @ 8:42 a.m.

Payday advances play a necessary role, providing hard-working people with a reasonable, well-regulated option for meeting unexpected or unbudgeted expenses and other short-term financial needs. Payday advances are small, unsecured, short-term loans, usually due on the borrower’s next payday. The average loan is $300 and the typical fee is $15 to $17 per $100 borrowed. The payday advance industry exists because we offer our customers a product that is more desirable than the alternatives. Payday advance customers are educated, hard-working, middle-class Americans who face unbudgeted or unexpected expenses between paychecks and want and need access to short-term credit. Payday advance customers are not the “un-banked”, as 100% have a checking account at a credit union or bank, but turn to payday lenders for small dollar short-term credit needs. State regulators confirm that, out of millions of customers, there are very few complaints. CFSA’s mission is to promote responsible industry practices and support laws and regulations that protect consumers. Like all industries and issue advocates, CFSA works within the democratic system by engaging diverse and experienced professionals to educate policymakers about our services and to advocate on behalf of progressive legislation. Our individual members make contributions locally and federally. They do so for the same reasons everyone else does—to participate in the democratic process and help support candidates and legislators they believe will best represent them. In addition, we have a political action committee which supports candidates.

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SurfPuppy619 Oct. 19, 2009 @ 11:51 a.m.

Payday advances play a necessary role, providing hard-working people with a reasonable, well-regulated option for meeting unexpected or unbudgeted expenses and other short-term financial needs.

Hey Pinnochio-your nose just grew 30 feet with that whopper.

And next time spam another board with your book long BS, OK shyster.

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SurfPuppy619 Oct. 19, 2009 @ 11:54 a.m.

A lot of states ban such lending operations, which allow clients to borrow against their next paycheck, and there’s a move afoot in Congress to impose a nationwide prohibition of the practice.

And they ban these shystes for good reason-it harms the borrower (who needs to be saved from themselves) as well as society at large.

It is society that pics up the pieces of these poor people who get scammed by "PayDay lenders", aka rip off artists, in the form of subsidized housing, food stamps, medical care, and other social services, because after the payday scammers have scammed the ignorant folks (not stupid, but ignorant) for all their money they turn to the state-aka the taxpayers- to house, cloth and feed them and their dependants.

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Ponzi Oct. 19, 2009 @ 12:31 p.m.

The state sets the fee they can charge. So the load places are just operating within the legal guidelines. Not all people are abused by it. Some people need some cash for an emergency and this is an option. The problem is that some people get upside down because they simply can’t be responsible with their money. It’s a shortsighted approach to their money issues. No different than problem gamblers or over-eaters, they can’t control themselves or their desire for short term pleasure vs. the long term damage.

Some recommendations would be to make these loan places offer classes, courses (on DVD and print) that show case studies of people who have gotten into trouble with cascading serial loans. Some other regulations are probably in order to deter the problem borrowers.

It’s a resource for people who don’t abuse the loans. Most people may just be down on their luck, have an emergency and with bad credit this is the only loan they can get.

This is a personal responsibility and education issue. Our high schools don’t emphasize teaching how to manage money and personal finance. So we have people that go out into the world without a clue and just play it by ear. People need to have resources to learn about the relationships between earning, saving and debt. To live within their means, not take on more debt than they can serve and work on a back-up savings plan.

Eliminating a safety valve could makes matter worse. People might have unmet medical needs, resort to crime, foolishly try to gamble, or other ill effects.

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SurfPuppy619 Oct. 19, 2009 @ 1:59 p.m.

The state sets the fee they can charge

No, the state does not set the fees they charge, they can set the fee to the rate of any state in which their company is doing business, as a principle place of business.

This why states can not regulate banks, and why banks set up offices in bank havens that cater to the banks-like DE caters to the corporations.

They do not provide a legitimate service and are in fact just like LaPlacaRifa48619 stated in Post #1-loan sharks.

It is not heslthy for the borrower and it is not healthy for society that picks up the pieces when these scammers wreck havoc and everything meltsdown.

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SurfPuppy619 Oct. 19, 2009 @ 5:04 p.m.

Ponzi-from YOUR website-

"Consumer advocates say regulation is very uneven and payday lenders are often able to circumvent state laws."

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Ponzi Oct. 19, 2009 @ 8:24 p.m.

You so good with rhetoric. You are attempting to cover-up your false statement by citing “Consumer advocates say regulation is very uneven and payday lenders are often able to circumvent state laws…" So what? That doesn’t mean the state doesn’t set the rates. Which you said they did not. They in fact do.

The circumventing is the online payday companies and that’s the users fault at that point. If they have to use an out of state check cashing firm on the internet, they are the problem anyway. Just like online gambling circumvents gambling laws.

My point is don’t post that something is not true as a fact before you have at least tried to research it.

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or Oct. 19, 2009 @ 8:31 p.m.

10

with a lawyer, obfuscation comes with the territory.

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SurfPuppy619 Oct. 20, 2009 @ 6:38 p.m.

with a lawyer, obfuscation comes with the territory.

By occumsrazor

Now now that is a terrible generalization to make about a profession :)

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or Oct. 21, 2009 @ 11:09 a.m.

surfpuppy, perhaps it was meant as a compliment.

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