Pay-Day Lender In Dispute With Cooper Will Stop Using Out-Of-State Bank
Posted December 13, 2002 2:51 a.m. EST
RALEIGH, N.C. — A pay-day lender sued by Attorney General Roy Cooper for charging illegally high rates has agreed to stop using an out-of-state bank to hide its pay-day loan operations.
Cooper made the announcement Friday.
Consumers need access to short-term loans at reasonable rates, especially during tough economic times," Cooper said. "But many consumers who turned to ACE for help soon saw their debt snowball even faster thanks to outrageously high interest rates."
Under terms of a consent judgment approved Friday by Wake County Superior Court Judge John B. Lewis, Jr., ACE cannot make any loans within North Carolina for the next year.
To re-enter the loan business, ACE must obtain a state licence and obey state laws that regulate loan offers and terms.
In addition, ACE has agreed to drop claims that its affiliation with a nationally chartered bank makes it immune to state regulation.
In the past, ACE used its partnership with Goleta National Bank to argue that federal banking laws preempted North Carolina's ability to regulate loans made by ACE.
ACE may continue to operate its check-cashing business but must do so in compliance with state law.
The judgment resolves a complaint brought last January by Cooper and then-Commissioner of Banks Hal Lingerfelt that accused ACE of violating North Carolina's Consumer Finance Act.
ACE, which operates at least 16 North Carolina stores, charged customers $17 per $100 for two-week loans of up to $500, an annual percentage rate of approximately 443 percent.
Two-week extensions of the loans cost another 17 percent plus five percent of the principal. The state Consumer Finance Act permits only a 36-percent annual interest rate on loans under $600.
ACE's rates and rollover were prohibited by a now-expired payday lending law, Cooper said.
After a four-year experiment with payday lending, state legislators allowed state laws that permitted payday lending to expire Aug. 31, 2001.
Some pay-day lenders have closed their doors, while others, like ACE, teamed up with out-of-state banks, claiming that a legal loophole allowed them to keep making loans.
Cooper and current Commissioner of Banks Joseph A. Smith, Jr., have three other payday lawsuits in litigation.
"We may have put one pay-day lender out of business in the short term," Cooper said. "But we need a long-term solution - a strong state pay-day lending law that protects consumers."