First Fidelity Bank of Burke, S.D., plans to stop funding payday and installment loans for Advance America Cash Advance Centers Inc. in Arkansas on April 8 and June 24, respectively.
Advance America, of Spartanburg, S.C., disclosed the move in its annual report last week — about one week after it said another bank partner, BankWest Inc. of Pierre, S.D., would stop funding its payday and installment loans in Pennsylvania.
The Federal Deposit Insurance Corp. has been pressuring banks to stop exporting their states’ interest rates to fund payday and installment loans elsewhere. Several banking companies, including First Bank of Delaware and Republic Bancorp Inc. of Louisville, have said in recent weeks that they would quit payday lending.
Advance America said it is “studying alternative methods for conducting business” and has no plans to close any of its 30 stores in Arkansas or its 101 stores in Pennsylvania.
Advance America said it will continue to service outstanding payday loans in Pennsylvania until Aug. 31 and in Arkansas through September.
Arkansas and Pennsylvania have not been the only problem areas for Advance America.
In December of 2005, First Fidelity Bank suspended its operations with Advance America in North Carolina.
In the same month North Carolina’s commissioner of banks, Joseph A. Smith, issued a cease-and-desist order telling Advance America to cease operations in the state. The company incurred $2.7 million in expenses related to closing its North Carolina stores.
Like other payday lenders, Advance America had to shift its business in mid-2005, when the FDIC put a limit on the amount of repeat business payday lenders could do with customers.
The company began offering check-cashing and deferred-presentment services in its Michigan stores in June and began operating as a credit services organization with a nonbank partner in Texas in July. Total outstanding advances, installment loans, and fees receivable for Advance America’s lending banks have steadily declined; at the end of 2005 they were down 64.56% from a year earlier.
Advance America said that it would lose $2.3 million a month in Pennsylvania and $500,000 a month in Arkansas by not being able to offer bank-funded loans. The company said it would cost $2.9 million to shut down operations in Pennsylvania and $700,000 to leave Arkansas.
