N.C. A.G. Files Lawsuit Against Bank Making Predatory Payday Loans

    Monday, January 14, 2002 

Contact:  Peter Skillern, CRA*NC 919-667-1557 ext 22. 

Citing predatory bank practices that circumvent state consumer protection laws, three bank watchdog agencies today announced an initiative to protest banks' ability
to rent their charters to payday lenders.  The Community Reinvestment Association Reinvestment Committee (San Francisco, CA) and the Woodstock Institute (Chicago, Ill) all expressed strong support of the North Carolina suit against Ace Cash Express and Goleta National Bank.

"We applaud Attorney General Roy Cooper for filing suit," said Peter Skillern, Executive Director of the Community Reinvestment Association of North Carolina.  "We have to end the practice of banks teaming up with payday lenders to make abusive and predatory loans. We will pressure rent-a-banks through regulatory petitions and direct actions."

California's leading bank watchdog agency is joining the fight against California-based Goleta Bank, which partners with Ace Cash Express to provide payday loans in North Carolina.  "We hope the North Carolina Attorney General wins the lawsuit," said Arthi Varma of the California Reinvestment Committee.  We will petition the bank and its federal regulator, the Office of the Comptroller, to end this shameful practice."

Advocates have reason to believe their petitions will be heard.  On January 3, the Office of the Comptroller of the Currency ordered Eagle Bank of Pennsylvania to end all payday-lending-in part because of the bank's intent to circumvent state laws. (http://www.occ.treas.gov.)  Eagle Bank rents its national charter to Fayetteville, North Carolina-based Express Money Service and also to Greensboro based Urgent Money Service to provide payday loans out of a total of 68 branches statewide.  Express and Urgent Money Service will have to find another bank partner or close their doors.

In North Carolina in 1999, $650 million in payday loans generated nearly $100 million in fees to consumers with average interest rates topping 460%.  Typically, a consumer pays $15 per $100 borrowed with most loans lasting less than 14 days. On August 31, 2001 the North Carolina General Assembly allowed the authorization of payday lending to expire, making payday loans illegal.  But while more than 100 payday lending businesses closed, larger companies simply partnered with out-of-state-banks-using federal pre-emption to circumvent the new law. A list of payday lenders and their affiliation with banks is attached.

"How can state legislatures protect consumers," asked Marva Williams of the Woodstock Institute, "if federal regulators allow banks to export interest rates of over 400% in direct violation of state law?  Banks willing to break North Carolina laws will soon break Illinois laws."  Illinois-based Brickyard Bank partners with Check n Go of Ohio to make payday loans in 57 branches across North Carolina.
Contact Information:

Community Reinvestment Association of North Carolina
Peter Skillern, Executive Director, PO Box 1929, Durham, NC 27702 
919-667-1557 ext. 22

Woodstock Institute           
Marva Williams, Associate Director, 407 S. Dearborn, Suite 550 Chicago, IL 60605 312-427-8070 

California Reinvestment Committee 
Arthi Varma, Policy Advocate, 474 Valencia St., Suite 110 San Francisco, CA 94103 415-864-3980