MARINE CORPS BASE CAMP LEJEUNE, N.C. – -- Three more of the payday lenders have signed agreements to stop making illegal loans in North Carolina here March 1.
The agreements mean that payday lending by all major companies here has come to a halt.
“We’ve fought payday lending at every turn and now we’re putting this industry out of business here in North Carolina,” said Attorney General Roy Cooper. “These payday lenders thought they’d found a way around North Carolina law. Now we’re showing them the way out of our state.”
Lenders have between 30 and 120 days to collect only the principal balance on any outstanding loans. Payday lenders have also pledged $700,000 to organizations, which help people with the financial troubles.
Studies have indicated that approximately seven percent of military personnel use payday loans, according to Marine Corps administrative message 060/05. Payday loans are attractive to Marines facing financial dilemmas because they are easily obtained.
The loans are usually small short-term arrangements designed to give a Marine enough cash to make it to the next pay period. They are high interest, rapidly compounding loans that can devastate a Marine’s personal finances. The loans are usually not paid off immediately and the Marine has to spend more and more money to pay it off. The loans average more than 300 percent above the loan amount.
“It forces a person to keep using the lenders because they are constantly short on cash,” said Roy Ells, the financial management health promotion specialist for Marine Corps Community Services.
People get the money for quote emergency but usually they spend it on frivolous things, according Ells.
“If it were truly an emergency you could go to the Navy Marine Corps relief society,” Ells said.
The state experimented with payday lenders for four years and ended it in 2001 but some of these business used out-of-state banks and rent-a-charter relationships to hide illegal loans.
State law allows a maximum rate of 16 percent on loans under $16,000 except that licensed consumer finance lenders can charge up to 36 percent on loans under $600.
“A payday loan my sound like the solution to someone facing unexpected bills, but once you get sucked in it’s difficult to escape and your debts snowball quickly,” Cooper said. “People need access to short-term emergency loans, but with fair rates and more time to repay the loan.”