Good riddance

One month and 10 days — that's how long it took Advance America, the state's largest payday lender, to determine that charging a mere 36 percent interest on personal loans just isn't a viable business model.

An AP story in today's Union Leader reports that Advance America is closing all 24 of its stores in the state, including three here in Manchester. The reason? Starting January 1, the State of New Hampshire capped interest rates of personal loans at 36 percent.

According to the Boston Globe, "payday lenders typically charge $20 per $100 for two-week loans backed by the borrower's car title or next paycheck. That amounts to 1.43 percent interest per day, an annual rate of 521 percent." Let me restate this with the appropriate punctuation: That amounts to 1.43 percent interst per day, an annual rate of 521 percent!

In my rural hometown in Tennessee, businesses offering payday and title loans seem to be popping up on every corner. Upon moving to New Hampshire in 2004, I began to see these same predatory lenders making inroads here in Manchester.

Working, at the time, at HippoPress, I wrote a story on the relative proliferation of these businesses. I asked the store managers and other employees of several of these stores how they could justify charging people what equates to an annual interest in the hundreds. Their response was that their customers, many of them living paycheck to paycheck, had very poor credit and couldn't get conventional loans from conventional lenders. They, on the other hand, were performing a noble public service, providing credit to the city's poor who might otherwise have no way to fix their cars, pay medical bills, make rent or buy their kids something for Christmas. And if they charge "higher than usual" interest, well, it was justified because their customers are high credit risks.

I had to admit they had somewhat of a point. If you can't get a loan from a bank, where are you supposed to go? Better a legal loan shark than an illegal one, I supposed. But still, 521 percent interest? That's gratuitous, and is essentially punishing people for being poor.

I've since learned that, contrary to the talking points of the predatory lending industry, there are, in fact, other, better options for individuals with poor credit. Among these is the MyPay Loan program at St. Mary's Bank. This program allows an individual to get a unsecured personal line of credit from which they can draw from up to 12 times a year for either a $250 or $500 loan at a fixed interest rate, with no late fees or pre-payment penalties.

According to the New Hampshire Banking Department, as of February 3 of this year there were some eight "small loan lenders" in Manchester. With Advance America closing up shop, that number will drop to five, not counting the city's rent-to-own outfits, which also qualify, in my book anyway, as predatory lenders. Here's hoping these remaining loan sharks will swim out of Manchester very soon.

Personally, and for purely aesthetic reasons, I'd like to see this red and yellow monstrosity, otherwise known as Loan Max, on South Willow Street be the next to go: