Attorney General Roy Cooper of North Carolina has done excellent work on behalf of consumers. He recently announced that the last three major out-of state payday lenders agreed to stop making illegal loans in North Carolina. Attorney General Cooper successfully argued in front of the state Commissioner of Banks that Advance America violated North Carolina usury laws by providing loans at interest rates in excess of 400%. Commissioner Joseph Smith, State Commissioner of Banks, ruled that since 2001, Advance America operated illegally in North Carolina by establishing a partnership with an out-of-state bank to undermine state laws. Advance America is the largest payday lender in the United States, operating more than 2,600 lending stores across 37 states with sales exceeding $570 million.

As a result of Attorney General Cooper’s tough stance, working families in the state will save almost $100 Million a year. As we have written before, payday lenders make small loans and charge interest rates as high as 500%, trapping families in a cycle of debt from which many never recover. This milestone in North Carolina should be an example for other states where payday lenders still do business. Stopping this industry in North Carolina did not happen overnight. It was a tough battle that took five long years.

There were numerous groups that joined in the fight to stop this horrendous practice. The North Carolina Council of Churches, the AARP, the NAACP, the North Carolina Justice Center, the Community Re-investment Association, the North Carolina Fair Housing Center, organizations representing military families, and many others helped to stop this terrible practice. To begin this five year fight, the North Carolina legislature had to admit that the payday lending was bad – that borrowers were trapped in a cycle of debt and that this should have been prohibited by North Carolina law. Legislators resisted incredible lobbying pressure to enact tough laws to stop these loans.

Some out-of-state payday lenders thumbed their noses at North Carolina’s new prohibition against payday lending. Strong persistent state officials – specifically the Commissioner of Banks and the Attorney General – sought to enforce the will of the state legislature and the rights of North Carolina citizens. Federal banking regulators also joined in by ending sham partnerships between out-of-state banks and out-of-state payday lenders seeking to evade North Carolina’s law. Some reputable lenders, such as the State Employees Credit Union, emerged as strong leaders to offer alternative products that actually met the need for emergency credit without gouging the consumers. All are to be commended for their great work.

Unfortunately, in Alabama the predatory lending industry is alive and thriving. It seems like every strip mall in Alabama has a predatory lender in it. I hope the Alabama Legislature will pay attention to this growing trend in this state that allows these and other predatory lenders to thrive. We all know that Alabama has the weakest consumer protection laws in the entire country. It is time our legislature did something to protect our consumers in this regard. I believe that a good starting point is to end payday lending as we know it. I am very glad that the leadership in North Carolina stood up against these powerful forces. Hopefully, other states will follow suit.

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