Leader Blues

Friday, September 26, 2008

TOP STORY > >Many firms still making expensive loans here

By JOHN HOFHEIMER
Leader senior staff writer

With Advance America closing its Jacksonville location and all 29 other Arkansas stores, only about a third of 275 payday-lending stores remain in business in the state, according to Hank Klein, founder of Arkansans Against Abusive Payday Lending.

“Closing all their stores down is very positive,” according to Klein, who used to be CEO of Arkansas Federal Credit Union, headquartered at Jacksonville. “My expectation is that there won’t be many left by the end of the year.”

Currently there are 98 still in business. Advance America has been the largest provider of payday loans in Arkansas over the last several years. It will close all Arkansas stores by Oct. 31.

Nonetheless, other payday stores operate in Arkansas, including those still in Jacksonville, Gravel Ridge, Sherwood, Lonoke, Cabot and Searcy.

Attorney General Dustin McDaniel sent cease-and-decease letters to Advance America and about 60 others in March, noting that their lending practices violated the state’s 17 percent interest cap and warning that the state would sue them.

“This is a major victory for the consumers of Arkansas and a huge victory in our battle against predatory lending in Arkansas,” said McDaniel. “The largest provider of payday loans in the state has closed its doors, without litigation, in response to our efforts.”

“What (payday lenders) are doing isn’t right in Arkansas, never has been right,” said Klein. “The Constitution rules in Arkansas and this is the proof.”

Klein said the efforts of the state attorney general and of Peggy Madsen, the once-reluctant regulator of payday lenders, plus the lawsuits by Todd Turner have made it too difficult and too expensive for the payday lenders to operate in the state.

Advance America, listed on the New York Stock Exchange as AEA, also announced that it had completed closing of all nine payday stores in New Mexico.

“In Arkansas, the attorney general and the State Board of Collections have made regulatory decisions that do not allow the company to operate profitably in that state,” according to a company spokesman. “The company has worked closely with the attorney general’s office on this matter, and reached agreement that no further legal action would be forthcoming.”

“We respectfully disagree with the interpretations of the law by the attorney general and the State Board of Collections,” said Advance America’s president and chief executive officer Ken Compton. “We have always strictly adhered to all applicable laws in Arkansas, under the supervision of state regulators, as we do in all of the states where we operate. Indeed, there has been no determination by any Arkansas court that Advance America’s practices ever violated state law. Still, after lengthy discussions with the attorney general’s office, we have determined that it is in the best interest of both parties to avoid litigation and to resolve this matter at this time.”

During the first six months of the year, Advance America generated revenues in Arkansas of $2.34 million.

“We regret that the elimination of a regulated and market-based credit option in Arkansas and New Mexico will, unfortunately, leave tens of thousands of consumers without a simple, sensible and responsible avenue for managing short-term financial challenges,” Compton said.

After the closings in Arkansas and New Mexico, the company will operate more than 2,800 centers in 33 states, Canada, and the United Kingdom.