NEWS

New book sparks dialogue, puts human face on issue of payday lending in North Carolina

CHAPEL HILL -- Who hasn’t run out of money before the end of the month? In 1999, thousands of North Carolinians did, and they turned to the state’s 1,000 payday lenders who advance cash for a short-term loan for a fee.

Payday lenders made more than $530 million in loans last year, charging 15 percent, or more than $79 million, in fees. Advocates criticize payday lenders for excessive fees and rollover abuses. Payday lenders contend their industry provides a service people need.

As the 2001 North Carolina General Assembly prepares to take action on payday lending during its session beginning later this month, a new book and photo exhibit puts a human face on this complex issue through photographs, first-person accounts and essays of those involved — payday lenders, borrowers, regulators and consumer advocates.

"Too Much Month at the End of the Paycheck" aims to focus attention and spark debate on payday lending and its effects on consumers. It is a joint project of the Community Reinvestment Association of North Carolina (CRA-NC) and the Center for Community Capitalism at the Frank Hawkins Kenan Institute of Private Enterprise, made possible with a grant from the North Carolina Humanities Council. The Kenan Institute is part of the University of North Carolina at Chapel Hill’s Kenan-Flagler Business School.

The book and photos by local photographer York Wilson will be showcased in a series of venues statewide. A photo exhibit will open with a reception and discussion at the Hayti Heritage Center, 804 Old Fayetteville St., Durham, Jan. 12 from 5 to 6:30 p.m. The exhibit will be displayed through Jan. 31.

The explosive growth of payday lenders in North Carolina mirrors national trends, said Dr. Michael A. Stegman, MacRae professor of public policy and business, director of the Center for Community Capitalism and head of UNC-CH’s public policy curriculum. Although banned in 19 states

because of its high costs and potential for abuse, the number of payday lending outlets has grown nonetheless from just a few hundred in the mid-1990s to approximately 10,000 today, he said.

"By putting a human face on the issues of payday lending, we hope that this book will help state lawmakers and regulators improve the payday lending law," Stegman said. "As the first-person accounts in this book so eloquently attest, the growing network of check-cashers, payday lenders and pawnbrokers can be both a blessing and a curse."

CRA-NC Executive Director Peter Skillern added: "If payday lenders are allowed to continue operating in North Carolina, it is clear that reforms to protect consumers are needed. A payday loan can help solve being a ‘day late and a dollar short,’ but it shouldn’t mean owing your soul to the company store."

The state statute authorizing payday lending expires July 31, 2001, unless the General Assembly reauthorizes or extends it. The law was enacted on an experimental basis to determine how check-cashing firms offer this service and how it affects consumers. Lawmakers asked the N.C. Commissioner of Banks to prepare a report on payday lending to help inform its decision. That study is under way.

The new book contains Stegman’s recommendations for lawmakers and others to consider in their deliberations. Stegman calls for:

Closer scrutiny and oversight of payday lenders by the banking commission.

New laws or regulations limiting the number of payday loans a person can hold at a time, and banning outright back-to-back transactions, whether from the same or different lenders.

A public policy commitment to financial education and equal access to credit for all citizens.

The book includes a history of consumer lending by Dr. Peter A. Coclanis, George and Alice Welsh professor of history and chairman of UNC-CH’s history department.

The Center for Community Capitalism seeks to create public policies that foster innovative, public-private partnerships to reinvigorate markets, grow jobs, incomes and wealth in America’s disadvantaged communities. The center has three priorities: documenting the business potential of America’s inner-city emerging markets, linking electronic commerce and inner-city business opportunities and building community wealth through home ownership.

The Community Reinvestment Association of North Carolina (www.cra-nc.org), a statewide, nonprofit organization, aims to change the philosophy, orientation and practices of financial institutions in North Carolina so that the credit needs of traditionally underserved communities are fully met. The association works to improve financial institutions’ services to all North Carolina citizens through institutional advocacy, research, public education and community capacity-building.

Copies of this limited-edition book will be distributed to lawmakers and others involved in the debate. To see an online version, click to the Kenan Institute’s Web site, www.kenaninstitute.unc.edu.

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Note: For directions to the Hayti Heritage Center, call (919) 683-1709.