What the finance company sharks have planned for North Carolina

Loan sharksThere’s a common perception in the General Assembly these days that storefront consumer finance shops are not as bad a payday lenders. Indeed, this has been a common explanation offered by members of the Senate as they advanced legislation in recent weeks that will jack up the interest rates on consumer finance loans. 

If this is true, however, the difference between the two predators is just a matter of degrees, not basic characteristics. If payday lenders  are the great white shark of small loan predators, then finance companies are the tiger sharks. This truth is made clear in a new and powerful article from the muckrakers at the national news website, Pro Publica entitled “The 182 Percent Loan: How Installment Lenders Put Borrowers in a World of Hurt.”

The article looks at the reprehensible Georgia lending practices of World Acceptance Corporation – a South Carolina-based lender that has previosuly lobbied in North Carolina for legalization of the kinds rates and practices it employs elsewhere. As you will learn from the hair-raising article, World Acceptance may not be a payday lender, but its overall approach to its customers is just as predatory, if not worse — especially given that it frequently manages to bleed customers for much longer periods of time than the payday sharks.

At this point, World Acceptance is not registered to lobby the North Carolina General Assembly, but you can bet your bottom dollar that it is closely watching the actions of the current crop of finance company lobbyists  and the bill they managed to get through the Senate in recent weeks. They know that if the rate-hike legislation passes, North Carolina will be one step closer to welcoming the kind of lending  it practices in other states.

 

 

2 Comments

  1. Peter Larson

    May 14, 2013 at 7:21 pm

    I wrote twice to my state senator, Trudy Wade (R-27th), twice about this in February and this month, with no response. Now I know why.

  2. Doug

    May 15, 2013 at 11:15 am

    What you seem to forget is that these lenders are lending to very VERY high risk borrowers. When you have a delinquency rate of 15-20% you are already behind the eight ball when lending to these clients, average financial companies have 5% delinquents in a bad year. You have to START at those levels just to begin covering your costs. The referenced company’s return on assets is actaully about 13%…which is above average for financial companies, but this company looks like it is less asset intensive than most banks with brick and moartar.

    Point is…these companies are sharks….but their clientele is not exactly someone who is liable to pay them back and they have no other option when 1 out of 5 of them and their friends are going to run off with the money.