Advance America Closes 103 Cash Advance Centers
Even if you've never declared bankruptcy, you may have wondered how you were going to pay the rent, or the car insurance, or the credit card bill, before your next paycheck. And you may have used the services offered by Advance America or another cash advance (also called "payday lending") company.
Cash advance centers, which tend to market themselves to people with low incomes, offer short-term loans to consumers who would have difficulty getting loans from more traditional institutions like banks. All you have to do is post-date a check for the amount you want (plus a fee) and the center gives you that amount in cash. When the date on your check arrives, they deposit it.
The system sounds good in theory, but many borrowers are unable to pay their fees on time, and end up being charged high interest rates on their loans, which can cause a debt cycle that's difficult to break.
Lately, lawmakers have been investigating the practices of some payday cash lenders, trying to determine whether their practices can be considered predatory or usurious, according to Associated Press reports. Their findings have influenced legislation in some states.
In Oregon, laws have been passed to limit fees and interest on consumer loans. Because those two sources of revenue are the foundation of Advance America's income, officials for the company have reportedly said that operations in Oregon would no longer be profitable. In fact, sources have indicated that most similar companies have already shut their doors.
Forty-five Oregon centers are set to close.
Pennsylvania has also taken action to prevent shady lending practices. The state reportedly demanded that Advance America stop offering its so-called choice line of credit and halt operations in some branches.
Because the company does not know when-if ever-it will be permitted to reopen its doors, it has opted to close down 31 Pennsylvania centers. Additionally, 27 centers across the country deemed to be performing below acceptable standards will close, sources say.
Advance America's president allegedly maintains that the decision to close the 103 centers is in the best interest of the company's shareholders, and that the centers remaining open will continue to operate as usual.
But reports show that market values of Advance America stock has been falling. Perhaps this is because of an increased awareness of the dangers of this type of lending. Unwary consumers can land themselves in serious debt, and filing bankruptcy may be their only way out.
Advance America bills itself as convenient and helpful to those who cannot obtain loans from more mainstream channels. But payday lenders can lead borrowers to high interest rates and unexpected costs that foster more and more debt
