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Author: From Staff Reports Edition: Final RALEIGH -- State banking officials opened a hearing Tuesday that could decide the fate of the payday lending industry in North Carolina. At issue is whether Spartanburg, S.C.-based Advance America Cash Advance Centers has been operating illegally since a state law that had licensed and regulated the practice expired in August 2001. The office of Attorney General Roy Cooper contends the company has unlawfully circumvented state prohibitions. The result of the case could apply to all such lenders. Consumer advocates argue that payday lending traps financially desperate borrowers in high interest debt cycles. Payday lenders make short-term loans to people who need money between paychecks. Often, they charge effective annual interest rates in excess of 400 percent. The state's Consumer Finance Act caps annual percentage rates on small loans at 36 percent, though it has typically applied to traditional loan companies. Advance America claims that its distribution relationship with Republic Bank & Trust of Louisville, Ky., exempts it from state laws regulating consumer finance. If Banking Commissioner Joseph Smith Jr. determines that Advance America -- which has about 100 outlets in North Carolina -- is breaking the law, the company could be ordered to stop making the loans in the state. Any final decision could be appealed to an administrative law judge and possibly the state courts. (The Associated Press contributed to this report.)
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