Posted on: Friday, May 27, 2005

State checking payday lenders

By Deborah Adamson
Advertiser Staff Writer

Hawai'i is looking at regulating payday lenders, who charge steep fees for cash advances pegged to a worker's next paycheck.

State Auditor Marion Higa was asked by the Legislature to study payday lenders in Hawai'i to determine whether a regulation is needed. The analysis would be done over the next seven months, in time for the 2006 legislative session.

Payday lenders are found particularly near military bases, enticing service members with quick access to cash. Lenders like the security of cashing in a government paycheck.

Payday lenders are not regulated by the state.

"It is a problem," said Georgianna McAnany, financial readiness program manager for Schofield Barracks. Military personnel have been "advised to stay away from those places. But they still go and get this advance on their pay. ... They come here for help and they've already got the paycheck spent."

Payday fees can be steep.

For example, consumers who write a post-dated check for $120 to get $100 in cash to tide them over until their next payday in two weeks are paying an annual percentage rate of 521 percent for a 14-day advance.

The Legislature ordered the analysis after consumer advocates raised concerns that people didn't know they were paying high annual percentage rates.

"Any proposed regulation must come to us for analysis," said Higa, whose report would include looking for abuses against consumers and whether the cost of regulation would be supported by the lenders.

"It's not supposed to be a cost passed on to the general public," she said.

Reach Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.