Rhodes said that even though the payday lending industry provided a service, it too often took advantage of poor people.
“Many of these payday lenders are highly concentrated in some of the poorest areas of our state,” Rhodes said. “Go down to west Jackson or south Jackson amid the huddled masses of black and brown folk, and see the plethora of payday lending businesses. Then go to Madison and Ridgeland, and you’ll see very few of these loan places. Something is wrong with that.”
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Financial Services Center President Dan Robinson said that many payday lenders tend to occupy an area with plenty of vacant office space, such as Ellis Avenue and Terry Road in south Jackson.
“That’s a matter of supply and demand,” Robinson said. “Building owners in these areas are willing to make a deal to get their space filled, and also, as a business-owner, you would want to be on Ellis Avenue, Highway 80 or Terry Road. These are major corridors.”
Robinson said that the 572 percent APR was not a realistic translation because the life of the loan is only two weeks and is not annual in nature. To reach that level of interest, a borrower would have to refinance his or her loan every two weeks for an entire year. Current law bars a lender from refinancing the same loan or from charging more than 18 percent interest regardless of how long it takes a debtor to repay.
Ed Sivak, senior vice president of Hope Enterprise Corporation and director of the Mississippi Economic Policy Center, said the $21.95 fee that lenders can charge per $100 for a two-week loan is still one of the highest in the nation, however it is translated. Nothing in the law prevents a borrower from going to another payday lender to borrow the funds to repay the first.
The House and Senate will likely have to go to conference over HB 455, the bill extending the interest rate exemption for payday lenders. Versions of bills to extend the current APR exception will reduce the 572 percent APR up to 50 percent by extending the life of the loan from 14 days to at least 28 days but not more than 30 days. The House version extends the payment time for loans $201 to $500, while the Senate version extends the payment time for loans $300 to $500. Smaller loans can be paid in “up to” 21 days instead of 14.
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Spencer, meanwhile, urged people having difficulty trying to pay off their short-term loan to call Stewpot Community Services, and to be prepared to show paperwork proving the extent of their problem.
“If citizens are having a problem paying off a payday loan and buying food, and can demonstrate that to us, we will make sure they have food,” Spencer said.
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