Loan chain to shut down all NH stores
NASHUA – A second payday lender is leaving the state because of a new state law that went into effect at the first of the year capping the amount of interest short-term loan operations can charge.
Advance America Cash Centers, a publicly traded company with 2,800 stores nationwide, will shut down all 24 of its New Hampshire stores within a month, said spokesman Jamie Fulmer.
This will mean a loss of 50 jobs, which the company says could have been avoided.
“The government took action to put us out of business,” said Fulmer. “We’re very disappointed. They took a legitimate, regulated business, one that had no registered issues or concerns from customers, and driven them out of the state. It’s a shame . . . We were willing to work with them, but instead they chose a path that means a loss of jobs and a loss of viable options for people who need short-term loans.”
Locally, Advance America had stores in Nashua and Merrimack.
Advance follows the departure six months ago by fellow payday lender Check ‘N Go, said the company’s spokesman Jeff Kursman.
“The short answer to your question is that we haven’t operated out of New Hampshire for about six months now,” he said. “Probably for about the same reasons Advance is leaving.”
Check ‘N Go had stores in Nashua and Milford.
The law imposed a 36 percent per year cap on interest rates for payday and title loans. Most payday loan outfits were charging anywhere from 350 to 465 percent interest per year. Fulmer defended the practice.
“When a consumer comes in for a pay day loan, say of $100, they are charged $20 plus what they borrowed,” Fulmer said. “There was no additional interest or fees. At the end of the loan period, usually two weeks, they still only owed only $120. In a month, they still owed only $120. That was what they owed.
“Compare that to other options people who are in that situation have. Take, for example, a bounced check. The person writes the check for $100. They are then charged $33 from their bank and from the merchant another $25. One $100 bounced check in real-world dollars adds up to costing the consumer a lot of money.”
He went on to say that with the cap, each store would only bring in 7.5 cents per $100 lent, per customer, per day. At that rate, he said, Advance America couldn’t afford to keep its doors open.
“We did an analysis of a similar rate cap in Virginia,” Fulmer said as a comparison to what would have happened if Advance had stayed open in New Hampshire.
“They would have lost more than $150,000 per store, per year. With that rate, there’s no way to cover our overhead costs, rents to landlords, people’s salaries, plus the risk we take in making short-term loans.”
Similar measures have been passed in Oregon, Ohio, Georgia and North Carolina.
Advance, Fulmer said, has also had to close up shop in all of those states except Ohio, where they operate under, ” a different law.”
Fulmer said that in 2007, about 1.5 million individual customers used the company’s services nationwide. Statistics for how many people used the stores per state are not kept, Fulmer said.
Fulmer said officials at Advance tried to work out compromise deals with state officials including offering payment extension plans, which would have broken the money owed into smaller payments over a longer period of time.
Attorneys for Advance America also initially tried to argue that state-banking laws let it extend open-ended credit lines of at least $500 in $10 increments to consumers. This credit card-like form of lending would contain no interest if the money was paid back within a month. If it was not, the interest owed each year would range from 365 percent to 456 percent, depending on whether the borrower allowed automatic payment on the loan.
But banking Commissioner Peter Hildreth ruled against the idea calling such open-ended loans an unfair trade practice that was “deceptive” and “unscrupulous.”
In his five-page ruling, Hildreth pointed out that someone taking out a $500 loan at a 356 percent interest rate would have to make $2,325 in interest payments.
“A loan that envisions paying interest over 5.5 times of the principal of the loan is unscrupulous,” Hildreth wrote.
Hildreth also said the idea ran afoul of the Federal Trade Commission standard that his office applied to determine if the terms didn’t meet state law.
Fulmer said while legislators may feel as though they are getting rid of one problem facing cash-strapped citizens in the state, they’ve invited a slew of new ones.
“They may have run us out of town, but they’ve done nothing to address consumers’ need for a product like this,” Fulmer said. “It’s still there, only now they have one less viable, regulated option. Now, they may have to start bouncing checks or turning to the Internet for deregulated payday loans. Most of those places are domiciled in Costa Rica or Granada and have no regulations and the consumer has no recourse and no vehicle to complain.”