Rhode Island next to target short term lenders

Consumers and business owners in Rhode Island could have fewer options for short-term financing if lawmakers approve a bill that proposes interest caps for short term lenders. Rhode Island already has several rules in place that regulate lenders, according to the National Conference of State Legislatures. Currently, the state does not allow loans of more than $500, and lenders are prohibited from charging cashing fees greater than $5 or 3 percent of the value, whichever is higher, for public assistance and Social Security checks. Proponents of the bill - which would limit short term interest rates to 36 percent - say the short-term loan option takes advantage of consumers and creates a cycle of debt. However, others say the services provide a financing option to those living in low-income communities and warn the bill would force short term lenders to cease operations in Rhode Island. "This is not a reform bill; it's designed to eliminate our industry outright," Jamie Fulmer, Advance America's vice president, told The Associated Press. Some state laws have forced lenders to shutter their operations entirely. First Cash, a national short term lender and pawn shop operator, announced earlier this month that it had decided to sell its stores in Illinois, partly because new laws would make it more difficult to conduct business, Reuters reports. While legislators elsewhere in the country are also trying to limit short-term financing operations, other state lawmakers say the lenders offer an alternative source of funding for consumers who are short on cash. In Colorado, senators recently approved a bill that would allow deferred deposit loan companies to keep their up-front fees, The Colorado Independent reports. The bill's supporters said overregulation of the industry would kill jobs and leave consumers vulnerable to predatory lenders. "Loan sharks are out there and they would become an option if we were to over-regulate this industry as we did with last year’s bill," state Representative David Balmer told the newspaper. "This bill is trying to somewhat correct that (legislation) passed last year." In 2010, the state approved legislation that permitted lenders to charge origination fees up to $75, but forced them to refund part of the fee to borrowers who paid back the loan within 30 days, the newspaper reports. According to a recent survey from Experian and America Saves, 16 percent of Americans carry a payday, pawnshop or car-title loan.