Inside the offices of Advance America Cash Advance, posters telling stories of "the working mom," "the mailman " and "the hair stylist" reveal the payday lender's target audience.
As traffic zoomed by on Military Highway one recent Friday morning, customers trickled in. One paid off her $500 loan and ripped up the paperwork, declaring "I'm done!" About a dozen others borrowed money they said they needed, their thick office files indicating they had been there before.
Edwin Cruz, a pipefitter at the shipyard who lives nearby, paid off one loan and took out another to cover some bills.
Elected officials and civic activists who criticize payday lending say the businesses feed off low-income residents and military personnel, trapping them in high-interest loans and keeping them in poverty.
But an analysis by The Virginian-Pilot reveals the face of payday lending is closer to what's happening at Advance America: Lenders are targeting middle-income neighborhoods, usually near shopping malls, and avoiding poor areas.
It's why neighborhoods with lower median incomes - such as Norfolk's Berkley and Portsmouth's Brighton/Prentis Park - have no payday lenders, while Portsmouth's solidly suburban subdivisions along Portsmouth Boulevard near Chesapeake Square Mall have a cluster of them.
Payday lenders have even opened shop in upscale areas such as Chesapeake's Edinburgh Commons, which is near million-dollar homes.
Census data show that the population of South Hampton Roads has about a quarter of Virginia's population but about a third of Virginia's payday lenders.
Jamie Fulmer, director of public affairs for South Carolina-based Advance America, said payday lenders have flocked to Hampton Roads because of its large middle class.
Advance America is one of 12 payday lending outlets within a half-mile of The Gallery at Military Circle. According to the 2000 census, neighborhoods in that area reported median incomes of $30,000 or more, placing them solidly within Norfolk's middle and working classes.
"These are our customers - they're just good, hard-working, middle-class people," said Rob Ivison, Advance America's regional manager, as he watched business flow. Advance America and Ace Cash Express together own 55 payday loan outlets in Hampton Roads, and about 200 statewide.
Jay Speer, executive director of the Virginia Poverty Law Center, an outspoken opponent of payday loans, said he was surprised at The Pilot's findings.
"It's almost sadder that they're hitting the middle-income folks," he said.
"It's people struggling to make ends meet, which includes people at fairly high income levels these days," Speer said, adding that borrower statistics show that customers take out an average of 8.3 loans from a single outlet each year. "The problem is, once you get in, you have such a hard time getting out."
Payday loans work like this: Borrowers have to show a current paycheck and proof of an active checking account to obtain up to $500. The borrower writes a post-dated check for the amount of the loan, plus $15 in interest for every $100 borrowed. If the borrower doesn't return to repay the loan in cash when it's due - most loans are for two weeks - the lender cashes the post-dated check.
Advocates say payday loans provide easy access to cash to a population often ignored by institutional lenders. According to several academic and industry studies done since 2002, when Virginia first permitted payday lending, the average client is a high school graduate with a job and an average income of $40,000 a year. That still is the case today.
"The product exists because consumers like it," Fulmer, of Advance America, said. "There's nobody out there meeting this need with a less expensive product."
Payday lending has become a major issue in the General Assembly in recent years, as legislators have moved to curtail short-term lenders' ability to do business in Virginia, saying the poor must be protected.
Sen. Mamie Locke, D-Hampton, sponsored legislation this year to limit the annual interest collected by payday lenders to 36 percent. Currently, payday lenders can earn an annual percentage rate of 390 percent on a typical two-week loan. Locke, who also represents parts of Suffolk and Portsmouth, did not respond to several requests last week for interviews with the Pilot. She phoned a reporter Monday but could not be reached by return call.
Last year, the Norfolk Federation of Civic Leagues asked for stricter regulations on payday lenders, telling legislators that the businesses exploited "vulnerable citizens."
Barbara Scott, who led the federation's legislative committee, said she became concerned about the issue when more payday lenders located near Wards Corner, down the street from her neighborhood of Cromwell Farms, a few years ago.
Norfolk City Councilman W. Randy Wright said payday lenders aren't the type of business Norfolk wants to attract. Two years ago, the council passed a law that prohibited new payday lending outlets unless the businesses received council approval. Since then, no new lenders have been approved.
Wright said the perception was that payday lenders were predatory "bottom-feeders" who trap those struggling from paycheck to paycheck.
"It's not like you have one or two - they cluster," Wright said. "It makes the area look more downtrodden. And it gives the perception that this is an area that's slipping."
Despite Norfolk's ban and a 2006 federal law that prohibits payday lenders from making high-interest loans to active military personnel, payday lenders have become only more intent on setting up shop in commercialized and middle-class areas, said Michael Zarpas, president of Global Real Estate Investment. The Norfolk-based company owns, manages and develops commercial properties.
The federal law was passed after military leaders complained that lenders were saddling low-paid enlisted men and women with financial strains they couldn't handle.
"A lot of them, they got to the market under thoughts of lending to the military personnel but ended up lending to the civilian market instead," said Zarpas, whose company also finds new locations for Ace Cash Express. "Now, if they can have a free-standing building in front of a major shopping center, that's their dream deal."
Meghan Hoyer, (757) 446-2293, meghan.hoyer@pilotonline.com
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Unbelievable!
I'd much rather borrow $100 to cover a check for $15 because Bank of America will clip me for $39 if I bounce a check--but no one complains about that, now do they? If payday lenders had the lobbyists that BOA uses, no one would hear about them either. What a crock.
payday loans vs. other options
I am so tired of all the hoopla regarding payday loans. The big argument appears to be that they get people in trouble? Well, like 1 other smart reader noted, if that is the theory, we can target any business or industry. Heck, lets go after the automobile industry because they make cars that go fast...and if we speed we can get in trouble. Shouldn't adult, hard-working, consumers have the right to choose the avenue they want to receive financial help?
As for the outrageous APR's that is a joke. Yeah it is 365% on a $100 loan over a year (not 1,000%, Michael, where'd you get your information?), but we are not talking about a flexible interest rate or loans that carry over for that long. Virginia doesn't allow rollovers on payday loans, for one thing. It is a flat fee, the same as a credit card late payment, bank overdraft fee, or even utility reconnect fee.
And if you convert those fees to APR's, payday loans are still the best option available. A $27 late fee on a $100 credit card bill converts to a 657% APR. A $35 overdraft charge on a $100 bounced check converts to an 852% APR. And finally a $50 reconnect fee on a $100 utility bill converts to a 1,217% APR. Loo
Have you seen who's shoving this bill up Virginians' noses?
If you look at the full agenda of the major proponents of banning payday loans featured in the Pilot a few weeks ago, it is pretty scary. Their self-righteous, nazi-like attitude is insulting to the people of Virginia. The same people that think payday borrowers are stupid are the same people who support hatred and discrimination of gay people.
Free society, Free market
Are we free or do we live in a nanny state? When two consenting adults agree to a financial transaction that does not involve nor affect you or me, and does not violate any current law, what Constitutional right does the government have to regulate that, let alone ban it?
If I cut my wrist....
Is it the Knife manufactures fault or mine? If I break my foot by slamming it with a bat is it the fault of the Louisville Slugger? Then why do we say that people who "choose", again there's that word choose, to get the loan are not at fault for the situation they, THEY put themselves in? It's no secret that the fees are high. It's no secret that if you only pay a minimum payment you'll never get out of the loan. It's no secret that the only way to get out from under the PayDay loan is to either, NEVER GET ONE or PAY IT OFF ASAP. Only in America do we completely assign the blame on someone other then the moron responsable for the situation. The person that choose the situation...
Live within your means...
As with any business, you want to make a profit. With that said, why are we criticizing legitimate business for wanting to make a profit? The simple solution to end all of this criticism is to not use them. Consumers must live within their means. If you manage your finances based on your income, you will never have to use "those guys." Discipline, self-control, and a little of common sense restraint with your personal finances will never have you saying…"can I get a loan?"
Daniel M.
Does your wife know about your payday lending habits?
Jeesh. What a creep! Ban it for fools like that.
loans
Whoever thinks this is predatory lending is wrong. There is a thing called personal responsibility. People should get loans with a full understanding of the interest rates. You will be the same people to say mortgage lenders were predatory. You signed the papers, right?? Keep this is mind, what is more expensive, a $100 payday loan or a bounced check?
I would say VA power and HRUBS is more predatory since they are monopolies, at least with payday loans you have substitutes.
Consumer dug hole, payday industry filled it with cement
Yes, consumers getpayday loans, because they're desparate. They dug their own hole and stepped in that hole. The payday loan industry filled the hole the consumer put themself in with the cement of 500% APR to over 1,000.00% APR predatory loans.
LOOK AT THE INTEREST RATE
Why is it that the payday intustry never mentions the interest rates of up to and over 1,000.00% APR and would rather focus on the weekly cost. Well, a one hundred dollar loan at $15 per week, will cost over $750 in fees in a year!! Would you buy a car for 10,000 and pay back 75,000 in interest a year? Of course not. Yu could never get ahead. Payday loans are no different. They're vicious cycles, as the article said, the same victims coming back to try and dig out of the hole the payday loan industry dug deeper for the consumer. This is money that would be much better spent on food, clothing for the children of the middle class and actually paying bills instead of enriching the payday predators and their politician friends.
up to 1,000.00% A.P.R.
Predatory payday loans with interest rates of 500% APR to over 1,000.00%APR are harming the elderly and hard working middle-class AND the neighborhoods they are in. In the face of the payday loan industry's very high priced campaign of advertising and political contributions, I am embarassed that the Pilot glossed over the impact of payday loans. Interest rates are generally in excess of 500% APR and frequently as high as 1,000.00% APR. There is NO, repeat NO need for these worse than loan shark rate loans! 500% to 1000% APR !!!! The collection harassment to the working elderly is unforgiveable! The industry claims that the middle class wants this. WE DON'T, but our republican politicians won't help the military, elderly and middle class, nor will the democrats! Why, because those who need the help can't put up the campaign dollars the payday loan industry can, and few politicians will vote on principle (most of the Virginia politicians seem to work for the same few lobbying law firms now don't they?) It really saddens me that the politicians have turned their back on their neighbors infavor of the very profitable payday loan industry. The logic of the payday loan industr
who uses payday loans
Finally, an article that corroborates what the industry has been saying, namely, that payday loan customers are hard-working, middle class citizens. However, to now accuse the industry of "targeting" these folks is like accusing any business that chooses its location where it is likely to find the most customers as targeting. Isn't that the purpose of running a business? To find customers who will use your product or service? Whether it's Wal-Mart, the Ritz Carlton or McDonalds, the formula for finding customers is the same, and to pretend otherwise is folly.
Payday Loans
You must have a job to apply. Why have an office in a area with no jobs. With payday loans there will be no money anywhere before long. Where does the interest from these transactions go? Back to the banks that support them!
These loans need an interest cap.
These loans need an interest cap. Either cap them or outlaw them. No need to treat these people any differently than any other lending institution. Heck, I could get a better rate from Tony Fats.
Payday lenders aren't doing customers any favors.
Contrary to what the payday lenders' commercials say about their business, it is a predatory practice which is on par with the outrageous fees and interest spikes which credit card companies levy against someone who is late with a payment.
The smiling faces on the payday loan commercials say they are in favor of self regulation and fair lending practices. If they were truly in favor of them, they would have changed their usury practices before now.
Its time for Congress to put caps on interest and fees for ALL lending institutions.
Payday Lending
This story demonstrates that the customers of payday lenders are middle-class and that payday lenders do not "target" the downtrodden.
As a representative of the payday lending industry, I believe it is critical for people to understand that prohibiting payday lending in Virginia would only force consumers to use the other, more costly short-term credit products available, such as overdraft protection, late fees on credit cards and other bill payments and off-shore Internet lending.
In Georgia and North Carolina, where payday lending was also banned, that the Federal Reserve Bank in New York found that bounced checks, personal bankruptcies and complaints about debt collectors jumped significantly when consumers no longer had the payday loan option.
In addition, no one is offering Virginians any viable payday alternatives. To date, almost all of the attempts to create payday loan alternatives have either been charity-based, required government subsidies, unavailable to the general public, unprofitable or unsustainable.
I hope Virginian legislators will look carefully at the serious reforms instituted by payday lenders to protect our customers and ask themselves if bann
I like the freedom to choose to use payday lenders
I am a lawyer in the middle class. I have used payday lenders for those times I want cash without a paper trail. I can get $400 and use the cash for whatever reason. I then pay them in cash a couple of days later and the fee is greatly reduced. They give me back my check, and there is no record from my bank that I ever had the money. I don't borrow to meet short term financial woes, but I like to use them for that purpose. Payday lenders provide an excellent service by providing a legal way to accomplish discreet transactions. Why is the government continually trying to protect irresponsible people from themselves by taking away everyone's personal freedom?
It's a free Country, isn't it?
I'm not surprised that this creeping financial crud is reaching into the so-called middle class. Joe lunch pail, (or briefcase, if you will,) maxes out his second mortgage (equity loan), then maxes out his regular credit cards. Where else to look for credit? Like a junkie in need of a fix...the last resort is the payday loan, (or title loan, another piece of work). We don't need more regulation; the entire credit industry is due for a massive, rolling default, as people will simply stop paying down their unsecured debt. So far, we have only seen the tip of the iceberg, with minor defaults on first and second mortgages. I feel sorry for anyone in such dire straights that they need the services of these pay-day loan people. But, if they think it helps them....let them do what they want. It's a free Country, isn't it?
payday loans
It makes sense that the payday loan customers are primarily middle class, struggling week to week. People in the low class get government assistance, and people in the upper class don't need it. It's always the middle class who becomes the fall guy. God Bless America, right? Don't get me wrong, I LOVE my country and would never live anywhere else, but the middle class needs more breaks, too.
IF you have to borrow from pay check to pay check...
You are living above your means, period. Pay day lenders are only going put you further in trouble. Most people's financial plan is how to keep up with the Jones. If you want to blame someone, call or e-mail City Council and ask them why realestate assessments and property taxes are so high. The price of homes is out of reach for the average income in the Tidewater area.