NC mulls higher borrowing costs for consumer loans | The ...

Legislators are weighing whether to allow North Carolina's consumer finance stores to raise borrowing costs on installment loans used by about 500,000 people, a move opposed by some of the state's military leaders.

The House Banking Committee on Thursday heard consumer installment loan companies ask the state to allow them to raise borrowing costs that have stayed level since the 1980s. Income hasn't kept pace with costs and so they should be allowed to charge more, lenders said.

The regulated consumer finance industry is the subject of few consumer complaints because its loans spell out costs with "no tricks, no traps," said Chris McKinley, owner of Green CAP Financial Inc. in Burlington.

Col. Stephen Sicinski, commander of Fort Bragg, said he and his counterparts at Camp Lejeune Marine Corps Base and Seymour Johnson Air Force Base oppose the measure because it would give the lenders greater opportunity to take advantage of financially unsophisticated military servicemen and women.

"I'm not sure why anyone would think this is a good idea," Sicinski said.

The bill would raise the borrowing limit from $10,000 to $15,000 and increase allowed interest rates based on the loan size. The maximum interest rate would remain 36 percent, but that rate could apply to balances of up to $1,500, an increase from a maximum of $600 under current law.

That could increase the money problems facing military families and put more service members at risk of falling into the serious debt that costs them security clearances, Sicinski said.

A top Air Force official agreed.

"We at Seymour Johnson Air Force Base are in agreement with our Army and Marine counterparts from across North Carolina who oppose any legislation that puts the financial and professional future of our service members at risk," 4th Fighter Wing commander Col. Patrick Doherty said in an e-mail.

Consumer finance companies provide personal loans that are repaid at regular intervals, usually monthly. Customers need cash but might have riskier profiles than banks allow or seek loans smaller than a bank will process. The average loan amount was $2,341 in 2009, Banking Commissioner Joseph Smith said in a report on the industry earlier this year.

Most consumer installment loan companies in North Carolina averaged annual profits of around 10 percent over the tough economic period of 2007 to 2009, Smith said. Based on his review of the lenders, he said, he did not recommend any changes "either to enhance industry revenue or increase consumer protections."

Source: http://washingtonexaminer.com/news/2011/05/nc-mulls-raising-costs-consumer-finance-loans

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