AUGUSTA – Some of the nation’s largest payday loan chains have asked the state to rewrite regulations and allow them to open more stores in Maine.
If the changes are approved, regulators say lending could become profitable and the number of lenders in the state could jump from six to several dozen.
“This is the first effort by the industry to change the law markedly in the state of Maine,” said Will Lund, director of the state office of consumer credit regulation.
A payday loan is a short-term way for someone to borrow a few hundred dollars based on the concept that loan will be repaid when they get their paycheck. The borrower writes a check for the loan amount plus a fee, and the lender gives them the money. The lender cashes the check after a set period.
Under current state regulations, fees are set at $15 for loans of as much as $250, and $25 for loans of more than $250. Maine’s regulations and fee structure for payday loans have limited the industry’s interest in Maine, Lund said.
The proposed change would increase the fee to 17.5 percent per week, and payday lenders would no longer have to follow the state consumer credit code, which means they would not be subject to its rules on advertising.
If the changes are passed, opponents predict more lenders will come to Maine, and more Mainers will turn to payday loans. And opening the state to increased payday lending worries those serving as advocates for people on fixed incomes.
“They get sent on this sliding, downward spiral,” said Hannah Thomas of Coastal Enterprises Inc., a Wiscasset-based community development organization.
But proponents of the practice say surveys show their customers tend to be middle-income people who need the money to overcome financial problems. The loans require borrowers to have jobs and bank accounts.