Copyright 2001. The Associated Press. All Rights Reserved.
Sunday, October 14, 2001
Payday loan firms eye new ways to profit
INDIANAPOLIS (AP) - State regulators are investigating whether payday
lenders are skirting an Indiana Supreme Court ruling that says their
short-term loans violate state interest rate caps.
The Indiana Department of Financial Institutions is looking into some
firms that charge legal rates of interest but add on a "loan
participation fee" of $59.50 a month.
In the months since the Supreme Court's August ruling, payday lenders
reduced fees, stopped making loans, shut down or made loans through
out-of-state banks to sidestep Indiana banking laws.
To get a payday loan, a customer provides a postdated check for the
amount of the loan plus a charge. The check isn't cashed until the
customer expects to have the money in the account, usually within two
weeks. About 20 payday lenders are considering loan participation fees.
"What they're trying to do is basically collect the interest that the
Indiana Supreme Court said they could not collect," said Daniel Edelman,
a Chicago attorney who has filed numerous lawsuits against the industry.
"It's the effective equivalent of an interest rate."
A spokesman for the Indiana Deferred Deposit Association, a payday
trade group, said he was not sure how many payday lenders were charging
loan participation fees.
"We're telling our members to live within the law, and we're going to
work awful hard to try to change the law" in the Indiana legislature,
said Mike Brown. "My sense is that everything is legal until it is
proven not legal. There are a lot of alternatives out there. Each one
will probably have to be tested in court."
---- INDEX REFERENCES ----
KEY WORDS: AP STATE WIRES: INDIANA
NEWS SUBJECT: English language content (ENGL)
STORY ORIGIN: INDIANAPOLIS
NEWS CATEGORY: STATE AND REGIONAL
REGION: Indiana; Midwest U.S.; United States; North America; United States - Indiana; United States; North American Countries (IND USC US NME USIN USA NAMZ)
Word Count: 260
10/14/01 APWIRES 15:30:00
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