WLBT 3 - Jackson, MS: Federal legislation could snuff out quick loan shops

Federal legislation could snuff out quick loan shops

By Cheryl Lasseter - bio | email

JACKSON, MS (WLBT) - Imagine the landscape of Mississippi business changing, with the absence of check cashing, payday loan, title pledge shops and even pawn shops. House Bill 1608 and Senate bill 500, both in Congress, could effectively root them out by requiring a 36 percent cap on the interest rates Americans can be charged for short-term loans.

"It pretty much would kill us in the pawn shop business," says William Boles, owner of Big Daddy's Pawn Shop.  He's run the shop for 18 years, 12 years at the location near Meadowbrook Road in Jackson.  

A big part of Big Daddy's business is pawn transactions, short term loans involving merchandise as collateral. The annual percentage rate for a four-week $100 loan has to be sky high, but it only amounts to about $20 in the end. "It's the unbankable, the people that don't have banks. We can do their checks for them or let them borrow the money. You can't go to the bank and borrow $100," Boles says.

Dan Robinson owns 32 check cashing stores across the state. "When you're talking about anything less than 365 days, the APR's gonna be skewed," he says.  "Pawn transactions or title pledge transactions, the APR is huge because it's only a very short amount of time."

Robinson says his stores would never survive if the federal bills become law. "You're talking about $1.38 on a $100 loan. It's not feasible. You can't pay the rent for that."

The legislation would even affect banks: they'd have to lower their sky-high overdraft fees to keep them legal.

Mississippi's Banking and Finance Commissioner John Allison already regulates all of the businesses that would be affected. And he understands how consumers could lose out too. "They know what they're getting into when they get into it. If it's used as designed it's not a real impediment," he says.