ATLANTA - Consumer groups, prosecutors and many lawmakers thought they had shut the door for good. Three years later, however, payday lending could be coming back to Georgia under a bill moving through the Legislature.
Backers say the strict regulations and fee caps being proposed in the measure would create a tightly regulated industry kept in check by strong penalties. The result would be a far cry from the horror stories about predatory lending that helped kick the industry out of the state in 2004. Critics are far less trusting.
"They're basically trying to disinfect their image, but their track record on playing by the rules is awful," said Allison Wall, the executive director of the consumer advocacy group Georgia Watch.
According to sponsors and industry lobbyists pushing it, House Bill 163 attempts to cut out those rogue lenders while allowing legitimate companies to fulfill a demand for people who need quick loans and do not have access to credit cards or bank loans.
"What are they doing now if they don't have enough money to pay the light bill?" asked Rep. Clay Cox, R-Lilburn, who sits on the House Banks and Banking committee that has been debating the bill. "If there is a demand for a product of service, why is government denying people of that? These are adult citizens making the decision as free citizens to borrow this money."
The committee on Thursday voted 17-11 to clear the bill, setting up a full House vote in the coming weeks. Rep. Gloria Frazier, D-Hephzibah, voted against the measure because she has fielded concerns from several Augusta-area residents, including past victims of predatory lending practices, who do not want the industry allowed back.
As it stands now, the bill would allow payday lenders to charge consumers a $15 flat fee for every $100 borrowed - typically for two weeks or a month. The loans would not accrue interest and could not get rolled over into another loan.
People could only borrow up to 25 percent of their monthly income, and a single loan could not exceed $750 with $112.50 in fees charged.
If borrowers could not repay right away, they would be allowed an installment plan that comes from their next four paychecks.
A "cooling off" period of five days would be required before customers could take out a second loan from the same business. But as opponents point out, nothing in the bill would stop people from going to different lenders to get multiple loans at the same time.
Lenders also would not be able to give loans to members of the military or their dependents under the bill.
Georgia's law currently caps loans to a 60 percent annual interest rate, from which the payday plans would receive an exemption if the bill passes. Estimates vary widely on how much the proposed payday lending bill would charge in overall annualized charges depending on the amount and length of the loan.
Rep. Steve Tumlin, R-Marietta, who introduced the bill after being approached by the industry, said that if the $15 flat fee were considered interest, a 30-day loan for the maximum amount allowed - $750 - would have a 180 percent annual interest rate. But based on what the lenders would have to calculate for federal disclosure law, each loan would show a 390 percent annual interest rate, said Uriah King, a policy associate at the nonprofit group Center for Responsible Lending.
Mr. King pointed out that Congress has set an interest cap of 36 percent on payday loans for members of the military.
"If that's good enough protection for the military, why is it not good enough for Georgians?" he said.
Mr. King co-wrote a report last year for his group that showed Georgia has saved residents $149 million a year in lending fees since banning payday lending. But industry officials say the demand has not dried up in Georgia but has moved to other types of loans, such as car title pawns or other loans that require property as collateral, or largely unregulated online lenders.
Many Georgians have simply crossed states lines to Florida, South Carolina, Alabama and Tennessee, where payday lending is still legal, said Jabo Covert, the vice president for government relations for Tennessee-based Check Into Cash, which has 1,250 payday lending stores nationally.
"Member companies made over 500,000 loans to Georgia citizens," said Mr. Covert, who has been representing the industry at the Legislature. "If they live in Savannah, and they want to drive across the border, they can get a loan. People are demanding the product."
Augusta resident Michael Cain, a restaurant maintenance worker, visits a payday lender in North Augusta about once a month to get money to pay bills.
"I usually get $300," he said. "I go, and I take my bills, and on my payday, I go and I pay them back."
Mr. Cain said he has had no problems with the system.
"A couple of years ago, I went because the transmission went out on my car. It helped me out a whole lot and kept me from missing work," he said.
Brian Salvador, area manager of the Check Into Cash stores around North Augusta, estimated that 60 percent to 65 percent of their customers are from Georgia. He said most - 94 percent on average - pay back the loans.
"We even have people calling from middle Georgia," he said. "The need for the market is here, and the figures speak for itself."
Reach Vicky Eckenrode at (678) 977-4601 or email@example.com.
To read House Bill 163, go to www.legis.ga.gov/legis/2007_08/sum/hb163.htm.
To express an opinion for or against the bill, contact the bill's sponsor, Rep. Steven Tumlin, R-Marietta, at (404) 656-0177 or firstname.lastname@example.org.