Community Financial Services Association Says: Unfairly Eliminating Competition and Consumer Choice is Legislative Goal of GILA-Member Loan Companies.

Business Editors

ATLANTA--(BUSINESS WIRE)--Feb. 3, 2004

The Georgia Industrial Loan Association (GILA), a powerful lobbying group composed of owners of small installment loan companies, is attempting to persuade the House Banks and Banking Committee to support a proposed law that will eliminate their competition and allow GILA companies to dominate the small lending market by outlawing the popular payday advance industry in Georgia.

The new law would fine and imprison hundreds of reputable, hard-working small business owners in Georgia and force hundreds of thousands of consumers to seek financial relief from unscrupulous operators in an underground market of disguised payday loan-type products.

"If this bad legislation backed by GILA passes, ordinary Georgians now using payday advance responsibly will have nowhere to go to get a small, unsecured cash advance to cover unexpected expenses between paydays," said Steve Benjamin, counsel for the Community Financial Services Association of America (CFSA). "This bill is an outright attempt to restrict free trade in Georgia, and is designed to benefit the GILA members at the expense of average working Georgians."

CFSA (www.cfsa.net) is the trade association of reputable payday advance companies adhering to a strict code of best practices that offer significant consumer protection, information and education. Benjamin said CFSA is seeking fair regulation of the payday advance industry in Georgia borrowing from laws already enacted by 35 states and the District of Columbia.

The GILA law is a House substitute to Senate Bill 157, which would also outlaw payday lending and fine and imprison lenders. Republican Sen. Don Cheeks, a banker from Augusta who is openly supported by the Georgia Industrial Loan Association, introduced and helped pass SB157 through the Senate in the 2003 session of the General Assembly.

Benjamin urged Georgians to contact their state senators and representatives to work to stop the unfair GILA legislation, enact reasonable regulation of the industry and preserve consumer choice.

COMPROMISE BILL PRESERVES CHOICE, PROTECTS CONSUMERS

Meanwhile, a compromise bill offered by State Rep. Earl Ehrhart (R-Powder Springs), would create a strict code of best practices for the payday advance industry and require state licensing, oversight and accountability. The compromise bill would preserve consumer choice and establish meaningful guidelines for consumer protection.

Modeled after regulations and legislation in place in 35 other states and the nation's capitol, including laws most recently adopted in Oklahoma and Alabama, Ehrhart's proposal would:

-- Mandate state licensing of all payday advance lenders

-- Require full and clear disclosure to consumers in writing,

including the cost of the transaction, expressed as a total

dollar cost and as an annual percentage rate

-- Require a written notice to the customer as to the appropriate

use of the service and the dangers of frequent, long-term use

-- Establish the right of a customer to rescind the transaction

at no cost by the close of the following business day

-- Limit renewals (so-called rollovers) to no more than two, with

a 25 percent paydown on the advance required

-- Prohibit using or threatening to use criminal penalties for

purposes of collection against customers who cannot repay

-- Prohibit unfair or deceptive practices, acts or advertising

-- Limit maximum loan amount and fee

-- Provide customers with options to choose an extended repayment

plan

IMPORTANT MILITARY PROTECTION REQUIREMENTS

Although military personnel represent only two percent of all payday advance customers of CFSA members in Georgia, Ehrhart's bill would provide for these protections:

-- Prohibition against garnishment of any military wages or

salaries

-- Prohibition against conducting collection activities against

deployed personnel

-- Prohibition against contacting a commanding officer for

purposes of collection

-- Compliance with repayment agreement negotiated through credit

counselors

-- Honoring a base commander's order designating a payday advance

location off limits to military personnel

"The GILA bill is unfair to the consumer, unhealthy for Georgia's economy, and probably unconstitutional as well," said Benjamin, an attorney. "Rather than drive the industry underground - forcing Georgians to seek out more expensive and less desirable alternatives - rational people believe it is better to enact tough but responsible regulation that will bring Georgia in line with the rest of the nation."