Advance America shares surged yesterday when it reported that Grupo Elektra offered to buy all of the payday lender for $10.50 per share.

Grupo Elektra is Latin America’s largest retail consumer credit company. Their (more…)

Bank of America  has reached a 5-year agreement to offer a large line of credit to one of America’s largest payday lenders.

In an SEC filing distributed to the public last week, payday lender Advance America (more…)

Illinois Governor Pat Quinn signed a new law that gives payday lenders the legal room to ply their trade in the state.

The new law caps the cost of making short term loans. Going forward, payday lenders can only charge $15.50 for every $100 payday loan.There is also a cap for “installment loans,” which are distinguished from payday loans by their relatively longer terms. Those loans cannot have an interest rate above 99 percent, and there is a lower cap for larger loan amounts.

That is just the kind of law that payday lenders are sure to love. It gives them cover to define their lending as legal, and they can still make short-term loans that bear an annualized interest rate of 404 percent!

PayDay Pundit, a blog produced by the Consumer Financial Services Association, is spreading the news.

The Chicago pols are going to great lengths to put lipstick on this pig. “So it’s important,” says Quinn, “to those who offer credit to follow some basic rules in the market place that protect consumers from being gouged.” Lisa Madigan says that consumers should use “extreme caution” with this kind of credit.

Yesterday’s vote in the Senate on the CFPA should put a long shadow on the prospects of payday lending.

Senator Harry Reid pulled back the existing bill after 57 Senators voted in favor of one draft. Reid pulled it back because two Senators were withholding their support until the protections in the bill could be strengthened.  This creates an odd dynamic, where progressive concerns are holding up legislation that spells doom for some of the more predatory financial products out there. Payday lenders, who seem destined to become the fall guys for the sins of Goldman Sachs, will be severely constrained if the CFPA passes.

The holdups

Sen. Lincoln of Arkansas is concerned about derivatives, and she wants to see rules in place that would amend how they are traded. Lincoln wants an end to the trading of derivatives behind closed doors.  She’d go one step further and see to it that institutions trading in derivatives can’t gain access to the Federal Reserve’s discount window.

Sen. Maria Cantwell, working in concert with Sen. John McCain, have another proposal.  They would like to return to the rules laid out in Glass-Steagall. Gramm-Leach-Bliley rewrote how financial institutions are organized. It took away the firewalls that separated investment banks from commercial banks.  That was important.  It predicated the rise of money center banks like (more…)