Major payday lender is leaving Virginia

A big payday lender is quitting Virginia because of the tough economy and new restrictions on high-cost instant loans, but others are finding new -- and potentially controversial -- ways to keep open their money stores.

Recession and additional regulation have shrunk the ranks of cash parlors in Virginia more than 19 percent since December. There now are 630 payday-lending outlets -- down from 786, according to the State Corporation Commission.

Leading the exodus is Check 'n Go of Mason, Ohio, which is closing its 68 Virginia outlets. It is among five instant lenders surrendering their payday licenses to Virginia regulators.

"We're fighting to survive," said W. Allen Jones, founder and chairman of another major lender, Check Into Cash of Cleveland, Tenn., the nation's largest privately owned payday lender.

"People will not overspend; they're not confident in their jobs."

But rather than leave the state, Check Into Cash is closing 19 of 64 stores -- idling about 60 workers -- and shifting to pricier, lightly regulated open-ended loans. This could buttress annual profits that, when the company was offering only payday loans, had fallen to about $10,000 per store from $15,000 in 2004.

The open-ended loans, typically $750, are managed like a line of credit. But the fees are potentially unlimited.

Further, there are no caps on the number of open-ended loans that can be taken by a customer. In contrast, payday loans are restricted to $500 and borrowers can take no more than 10 such loans per year. Also, a payday loan has to be retired before another can be taken out.

To get around the limits on payday loans, more than three-quarters of the state's money stores offered open-ended loans. The 2009 General Assembly passed, and Gov. Timothy M. Kaine is expected to sign, legislation that blocks the end run by requiring lenders to offer one type of loan or the other. Those getting out of payday loans lose for 10 years their license to offer such a product.

Those fresh restrictions are driving Check 'n Go out of Virginia, though spokesman Jeff Kursman could not say when the stores will go dark. The company, which no longer is originating loans in Virginia and faces lease-termination fees for its offices and severance for laid-off workers, employs about 100 people across the state.

"Our stores are closing or are in the process of being closed," Kursman said. "It is our intention to close all of our stores in Virginia."

. . .

The steps some lenders are taking to stay in business alarm critics. They favor a tough crackdown on an industry that often provides credit for those who otherwise can't get it, but that opponents say exploits the poor and uneducated by miring them in debt.

"This industry refuses to be regulated in any way," said Jennifer R. Johnson, senior legislative counsel in the Washington office of the Center for Responsible Lending.

Also turning in their Virginia payday licenses: Allied Cash Advance, with 27 offices; and three small firms that operate a total of four storefronts in Virginia Beach and Buena Vista.

With 150 stores in Virginia, Advance America hopes to use a narrow provision in the latest clampdown to continue simultaneously offering payday loans and open-ended loans.

But there's a catch: The open-ended loans, now unsecured, would have to be backed with the borrower's motor-vehicle title. That provision was added by legislators to accommodate a handful of instant-loan firms that offer car-title and payday loans.

If commissioner E. Joseph Face Jr. of the SCC's Bureau of Financial Institutions approves Advance America's request, the company could slap liens on, or seize, the cars and trucks of borrowers who fail to repay their loans.

The new loan product "specifically complies with the spirit and intent of the commonwealth," said Jamie Fulmer, Advance America spokesman. Fulmer also said the Spartanburg, S.C., company wants to "give consumers a broader spectrum of competitively priced options to choose from."

. . .

Advance America's latest move troubles some lawmakers, who see it as another attempt by the nation's biggest publicly traded payday lender to bypass Virginia regulations.

"That appears to me to be potentially another end-run effort, contrary to the legislature's intent," said Senate Republican Floor Leader Thomas K. Norment Jr. of James City, who supported opening the state to lenders in 2002 but since has become a critic.

"Some of us who wanted to allow the industry to continue in Virginia see this as a thumbing of the nose at the legislature. It's annoying."

Legislators, already considering new restrictions on car-title lenders, said they may enact as well additional limits on payday loans.

Contact Jeff E. Schapiro at (804) 649-6814 or jschapiro@timesdispatch.com.