The Washington State Department of Financial Institutions issued a cease and desist order today to payday lender MoneyTree, Inc., for repeatedly violating provisions of recently passed legislation, that amongst other things, limits customers to eight payday loans with a 12-month period.
From the DFI order:
1.2 Unauthorized Rescission of Small Loans and Exceeding Number of Loans. From about January 1, 2010, to present, Respondent has repeatedly engaged in the following practice: Respondent permits borrowers to obtain one or more small loans from Respondent, then borrowers are permitted to “rescind” the loans several days later, up to and including the due date, for the purpose of obtaining a new larger loan or for extending the terms of the existing loan. The amount of the rescinded loan is then removed from the Veritec system, resulting in the loan not being tallied against the borrower’s statutory limit of eight small loans in any 12-month period.
1.3 Substantial Injury to Public. The effect of the above-described condut is that borrowers are able to obtain more than the statutory maximum eight small loans in any 12-month period, contrary to RCW 31.45.073. Additionally, the conduct results in an unfair advantage for Respondent over those licensees that limit borrowers to eight small loans in any 12-month period.
The investigation was launched after a tip to State Sen. Adam Kline’s office from a MoneyTree customer who described the scheme as a common payday lending practice. After receiving six loans from MoneyTree, the customer service representative advised her of the eight-loan limit, but told her that if she needed more than eight loans, they could roll her previous loans into one, allowing her take out seven additional loans over the 12-month period.
According to emails I have obtained, a subsequent DFI review of database records uncovered 104 accounts at three MoneyTree locations where customers at or near the eight-loan limit had their previous loans “closed administratively prior to new loans being given.” DFI examiners were dispatched to these locations this week, and confirmed the findings.
DFI administrators speculate that MoneyTree might outrageously claim that these loan consolidations are within statutory guidelines, but to this non-lawyer at least, RCW 31.45.073 seems pretty damn clear:
4) A borrower is prohibited from receiving more than eight small loans from all licensees in any twelve-month period. A licensee is prohibited from making a small loan to a borrower if making that small loan would result in a borrower receiving more than eight small loans from all licensees in any twelve-month period.
I suppose it’s conceivable a court might rule that MoneyTree has discovered a legal loophole in the new payday lending statute, but there’s no question that their rescission practice constitutes a blatant violation of the spirit and intent of the law. The whole purpose of this provision was to prevent the borrower from having a small loan spiral into an insurmountable debt at an annualized interest rate of 391%, a purpose that MoneyTree’s actions totally undermines.
The irony is that even these hard won payday lending reforms were a feeble compromise compared to the more sweeping bills the industry successfully fought off. Sen. Kline sought to limit the APR to 36%, the same maximum interest rate that may be charged to military personnel under federal law, while other proposals sought to merely halve or quarter the industry’s usurious rate.
But if this is how the industry responds to what can only be described as a legislative victory, perhaps it’s time to go back to the table and ban payday lending entirely.
Hmmm…..this is at the same time as the oh-so-radical concept of re-regulating the banking industry is being considered at the federal level. Could it be that the administration actually taking on such a thing might actually inspire officials at the state and local levels to….yanno, grow a pair?
Hmmmm
Isn’t MoneyTree the largest source of funds for the Evergreen Freedom Foundation??????????????????????????
I was wondering about those banners on the Money Tree stores, proclaiming their “new 45-day loans”. I guess that explains it, they simply just wrap the three smaller payday loans into one 45-day loan, but their return on invesment (i.e., usurious interest rates) remain the same.
Personally, I think there is probably a legitimate place in the market for these types of loans, provided that they are closely regulated and the interest rates is kept reasonable. Such loans allow people with no established credit pay for things like car repairs, etc. which allow them to continue to go to work to pay all their bills. But it is easily abused, so tight regulation is absolutely necessary.
At least with a pawn shop, the borrowers can’t borrow more than about a third to half of the value of their pawnable assetts.
I have nothing specific against MT, however I do think there is hypocrisy in a far right political type owning this sort of business .. not all that different from the drug dealers who live in wealthy suburbs.
It’s loan-sharking with lipstick.
The State of Arkansas, with a notoriously-bribeable Legislature, outlawed all payday loans several years ago. I have often wondered who is so powerful in Washington State that this predatory industry lives on. Thanks to sj@4, it is now a lot clearer. I should have known that some Republican prick was behind it.
Anybody here remember back when any interest rate over 12% was considered usurious, requiring the lendor to forfeit ALL interest and penalties?
and…who was that state senator who protected the money lenders? what’s her name. her. she’s called a democrat, apparently.
I think she’s also for the sonics subsdies…..
old what’s her name, the money tree shill.
@7
Well there was her and 90% of the Republican’s in Olympia…
question @7,
It wasn’t just Prentice, but yeah, Prentice is one of the worst on this.
@7,9
That’s why we’re for more AND BETTER Democrats!
@1 It’s not the same thing. Nobody in D.C. or Olympia gives a shit if individual borrowers go bankrupt. They only care about whether the banks go bankrupt.
Moneytree is so fucked,
@7 Well, if you’re motivated by concern for consumers, you sure as hell won’t get there by electing more Republicans. See #10.
GEE THERE CLOSING GOLDY BANK SO SAD
I hate these friggin’ loan sharks.
Even though folks that use them are often irresponsible, desperate & stupid…it’s still wrong.
Anyone ever know someone who uses these guys or other payday loans?
I met a young guy once playing golf who was into them. He also had a bad gambling problem and lost his family..and went broke.
Think it was more his addiction & reckless spending than payday loans. He would have gone to Guido if MoneyTree did not exist.
payday loan places should be illegal anyway…
@15
Yep!
Steve @ 12
Maybe Goldy will post Ezekiel 18:13 as the next HA Bible Study question?
What’s worse, high interest paydays loans, or people who are unable to get loans to pay their bills, so they resort to mugging people on the street and committing crimes to get the money they need?
@18…the problem is this: people who have to resort to payday loans start to rely on them, and eventually cant pay back the loan anyway…then what are they gonna do?
Follow the money.
Who owns Money Tree?
What!!!!!!!!!
The government’s messing with the free market again? (sarcasm)
#19, heh, heh, heh,
Looks like Money Tree wrote their own wikipedia page: http://en.wikipedia.org/wiki/Moneytree
So What Were SEC Employees Doing On Bush’s Watch?
They obviously weren’t regulating the financial markets, so how did they spend their time?
“On a day when President Obama argued for more government regulation over the financial industry, a new government report reveals that some high-level regulators have spent more time looking at porn than policing Wall Street. …
“One senior attorney at SEC headquarters in Washington spent up to eight hours a day accessing Internet porn. … An SEC accountant attempted to access porn websites 1,800 times in a two-week period and had 600 pornographic images on her computer hard drive. Another SEC accountant attempted to access porn sites 16,000 times in a single month.”
http://abcnews.go.com/WN/sec-p.....d=10451508
I hate these damn Loan Sharks.
Get rid of them and force folks to face their overspending some other way like growing pot for little kids.
@12: Perfect! Well done!
@18
There were plenty of flat-ass-broke-folks while I was growing up during the Boeing Bust years, pay day lending didn’t exist back then and I don’t recall crime being much of an issue.
@22
You know they’re talking about Republicans when…
@26 Yeah and it looks like Goldy isn’t the only guy who could use a vacation in a Nevada brothel.
At the interest rate MoneyTree charges, they can write off a lot of bad loans, and I suppose they do, but their business model looks like plain old Biblical greed to me.
There’s an argument here for greater state control over financial institutions.
In the last 10 years our largest savings and loan transformed from a regional S&L to a fraud facilitating mega bank, helped to cause the largest financial collapse in 2 generations and finally was resolved, liquidating the investment of a great many in our state.
And during that time a legal loan sharking industry arose to take advantage of those no longer served by local banks.
The best financial institutions in the tri-county area and in the state are Credit Unions which began and grew as a result of the collapse in the 30s.
A good go-forward policy would be to stimulate local depositor owned institutions and much stricter enforcement of state and federal regulations on those vampire squid banksters like MT.
Yikes, at the top of this page are ads for Richard Pombo for Congress and for Ted Nugent for Shitrock Wingnut. I hope they’re blowing their dough advertising here.
guy who owns m-tree is a dem.
usury/tax cuts 2010!
Seriously, what’s the difference between these guys and loan sharks? Somebody large named Guido?
@30
Well click on those. It does earn Goldy a small fraction of a cent for each click-through.
I’ve been amused by the Ted ads all day. There’s a few casinos in the area that run radio/tv ads and try to book big-name entertainment. Ted’s not playing one of those. The venue claims capacity @2500. Anyone want to guess the over/under on attendance?
@31
Hmmmm…
Look see who Dennis Bradford Donates to in 2006?
NATIONAL REPUBLICAN CONGRESSIONAL COMMITTEE – $2,000
NATIONAL REPUBLICAN SENATORIAL COMMITTEE – $1000
THE FREEDOM PROJECT – $4,000
AMERICANS FOR A REPUBLICAN MAJORITY POLITICAL ACTION COMMITTEE – $2,000
(Yes, he did also give $2,250 to the Washington STATE Democrats which is smart when you consider which party dominates the state in which his business is based.)
You can look up 2008 too. The telling one is the only candidate on the big ticket – ROMNEY FOR PRESIDENT – $2,100
34
Remember Ted’s biggest hit, “Cat Scratch Fever”? Remember the line, “I can make a pussy purr with the stroke of my hand”? Yet, the uptight Right gobbles him up now because he loves guns (and compound bows, which no ethical archer would use in the woods, unless he was too big a wimp to use a recurve).
@35
There’s intentional Puddybait in there…
37
I believe that Puddy–God, have mercy on his soul–has left us.
Czechsaaz @ 35, 37
That is Puddy-bait if I ever saw it! :-)
There is always a market for the financially desperate. Get rid of the loan sharks and let the guys with the hairy arms named Guido pray on these same people.
That’s what will happen.
I agree, loan sharking is disgusting and that’s precisely what this is.
But there has always been & always will be loan sharking.
Does Money Tree break folks arms & legs when they don’t pay?
I’m curious:
What would YOU say is a fair interest rate on an UNSECURED loan to someone with NO CREDIT?
More or Less than a credit card?
Who forces people to get loans from Money Trees?
It’s funny that no one commenting has gotten a payday loan from one of these places.
I got one for $300, cost me $45 for a 30-day loan. Yeah, that’s steep, but I needed the money.
Paid it back. Done.
They explained to me what it would cost, $15 per $100, which was a lot cheaper than bouncing 2 checks at the bank. You can say 1000% if you want, but it cost me $45.
# 45: One loan was never the problem. But taking out a loan every payday to cover the last loan is a problem. That’s where you get into the 300% + annualized interest.
And I guess you can always blame the borrowers for not being strong enough to avoid this trap. But the business model is set up to encourage borrowers to fall right into this trap, and it seems to work for the payday lender, for any variety of reasons.
As such, the business model needs to be regulated to take the financial profit out of encouraging such loans on a regular basis.