Maudine Holloway listens to a visitor's simple claim, an assertion repeated often in Calhoun County boardrooms and bank offices, a declaration taken by many as truth.

"Our economy is doing well."

Holloway, the director of Anniston's Community Enabler Developer, shakes her head.

"It might be doing good for some folks, but I have senior citizens calling and walking in here every day asking if I can help with their utility bills. It's not good out there for them.

"It is rough. These people, if they're unskilled, they can't make it."

There are numerous reasons why thousands of Calhoun County residents live check to check or rely on help from others. The county has taken gut punches from myriad sources — the closing of Fort McClellan, the slowness in the former fort's redevelopment, the PR hit from housing a chemical weapons incinerator, the environmental pollution in west Anniston, even the delay in completing the Eastern Parkway.

Nevertheless, Calhoun County's economy today exists in two seemingly divergent realities.

One is the Chamber of Commerce model: The economy is strong, with positive job creation, low unemployment of about 4.1 percent and a future resplendent with expected opportunities, many based on the state's love affair with the automotive industry. Fuel prices are deadly, but we're surviving. "I think on the surface the economy is good, but I think the underlying health of the economy may not be that great" because of gas and food prices, said Anthony Humphries, president of Noble Bank and Trust.

The other model is stark: The economy is too dependent on service-sector jobs — wait staff, food preparation, retail sales, secretaries, minimum-wage, blue-collar laborers, hotel employees — and has allowed predatory lending services to seep into nearly every nook and cranny along the Alabama 21 corridor. They represent a fringe economy, one that cannot be accurately measured in chamber statistics or by economists who believe low unemployment is the tell-tale economic gauge.

The city of Anniston's decision in November 2007 to place a moratorium on the issuing of business licenses for auto title pawn shops and payday lenders put the county on notice. The county's core has become a magnet for legal businesses that prey on low-income residents who have no other option or make questionable financial decisions, not to mention workers with seasonal or part-time jobs and fluctuating pay.

Title pawn shops specialize in small loans, typically under $1,000, secured by a vehicle title. Under the Alabama Pawnshop Act, the lender is legally allowed to charge the equivalent of 300 percent annual interest. Miss a payment, and your vehicle can be repossessed, even if the loan amount is far less than the value of the car.

Payday lenders offer cash advances against an upcoming paycheck, and are allowed to charge the equivalent of 456 percent interest.

According to Jarrod Simmons, the city's revenue officer, the number of title pawn businesses in Anniston has doubled since 2000 — from eight to 15 — as has the number of payday lenders, which has increased from eight to 15 since 2004.

The profits are more staggering. In 2004, the gross receipts for the payday loan businesses were just under $1.5 million, Simmons said. In 2007, that swelled to more than $3.5 million — and that's not counting revenue from title pawn shops, which do not report gross receipts to the city because of differences in their licensing. For comparison, Anniston's gross receipts for fast-food restaurants in 2007 was more than $33 million.

Now the city is waiting on a ruling from Attorney General Troy King on whether it can change its zoning ordinances to ensure that no check-cashing or payday loan business can locate within 600 feet of any similar business. The point, according to City Planner Toby Bennington, is to seek some sort of balance so that a proliferation of payday lenders in 2008 doesn't morph into a blight of vacant storefronts in 2010.

In that sense, it's a purely business decision for Anniston. But don't be fooled. This is not solely an issue of business, for Anniston or the county as a whole.

The rise of the predatory lending industry in Calhoun County calls into question both the health of our economy — forget the raw data, seek out the hidden realities — and the moral obligation cities hold. Without a demand for title pawns and payday lenders, there'd be no supply. Otherwise, these businesses "wouldn't be here," said Bill Fielding, dean of the College of Commerce and Business Administration at Jacksonville State University.

That's Economics 101.

It is inhumane for government to allow predatory businesses to prey on our residents, just as it's inhumane for those same leaders to allow an economic structure to continue that makes these businesses a necessity for those whose ends rarely meet.

"There is a moral aspect, and there can be a moral aspect applied to different businesses," said Bennington. "We do have to recognize the cultural and social aspect of any type of land use."

Anniston Mayor Chip Howell, when asked about a town's moral obligation to address a rise in predatory lending, had a direct, though brief, response: "I could not argue those statistics or those opinions. It is a cause of concern."

As it should be. As should be the county's overall economy, the key to any community's health. Even with the arrival of Kronospan in Oxford, expansion at Anniston Army Depot, Honda Manufacturing jobs in nearby Lincoln, and the sporadic success at McClellan, critics of the local economy are correct to point to the area's lack of job-creation diversity. It is clear that the county, and Anniston in particular, needs less of what it has and more of what it needs — high-tech, cutting-edge industries that Gov. Bob Riley has recruited to other parts of the state.

"Anniston has a culture that it is not in wealth creation, it's in wealth transfer," said Jacksonville State economics and finance professor Chris Westley, who maintains that Anniston's historical reliance on government-sector jobs is a hindrance to its economic growth.

"Until wealth is created again, you're always going to have a class (of residents) that depends on predatory lenders to get by. ... You've got to attract industry that attracts wealth, and it can't be (the Department of) Homeland Security (at McClellan)," Westley said. "That affects the culture of the city."

Mr. Mayor, would you agree that we need more wealth growth? "I won't argue that," Howell responded.

There is no quick-fix answer, no magic wand to wave. For Holloway, all she can think about is her clients, many of whom regularly grace the doors of payday lenders. "They see that moment of peace when they get that $200. It's a dream, a dream they have that next month they'll come up with something else. … It's a vicious cycle. But what can you do?"

That's a question we must answer. This community's moral obligation is clear. The proof sits up and down Alabama 21.

The Center for Responsible Lending, a nonprofit organization that combats abusive financial practices, has a North Carolina mailing address for a reason. It was here that one of the most progressive predatory lending laws in the nation was passed in 1999.

Back then, the North Carolina Legislature, with the urging of the CRL and with crucial backing from the state's banking commission, capped the rate on payday loans at 36 percent per year.

Payday lenders continued to operate in North Carolina, skirting the law by using out-of-state companies, but a ruling by the Federal Deposit Insurance Corporation in 2006 stopped the practice.

"Since then," says the CRL's Leslie Parrish, "payday lenders have essentially left the state."

What impact has this had on the North Carolina economy and, more importantly, on low-wage earners who came to use the establishments?

Very little, is the conclusion of a study prepared for the state banking commissioners by the University of North Carolina's Center for Community Capital.

The authors found: "The absence of storefront payday lending has had no significant impact on the availability of credit for householders in North Carolina," and that "more than twice as many former payday borrowers reported that the absence of payday lending has had a positive rather than negative effect on their household."

Perhaps more to the point, legislatures in 12 states and the District of Columbia have essentially done the same as North Carolina. New Hampshire joined the ranks earlier this year. These states make up roughly one-quarter of the U.S. population. They include New York, Connecticut, Massachusetts and the economic powerhouses of the South, North Carolina and Georgia.

These economies and the people who operate within them are doing relatively well without the "assistance" of payday lenders.

Steven Graves, a professor at California State University, Northridge, who has studied payday lenders, also makes this point: "You don't see enormous numbers of payday lenders across the state line in New Hampshire or in South Carolina" or any of the other states that border states where the practice has been outlawed, he says. "You see places that sell alcohol, cigarettes, strip joints, but not payday lenders.

"It just shows you, people can do without it."

Today's predatory lenders have two distinct advantages over their shadier forebears: skilled public relations defenders and laws legitimizing their work.

But the toll exacted on the economically vulnerable by these modern-day loan sharks is as harsh as it ever was.

Under the Alabama Deferred Presentment Services Act, which regulates payday lenders, for every $100 borrowed, debtors can expect to pay approximately $17.50 in interest and fees. Borrow $500 today and you'll owe $587.50 two weeks later. Roll that payday loan over 52 weeks and the interest works out to 456 percent.

One person at the mercy of those mean rates is Calhoun County's Wanda Champion, who was profiled in Wednesday's installment of The Star's predatory lending series. After a series of medical problems and other twists of misfortune, Champion had nowhere to turn except predatory lenders. Now she's harassed by collection agencies looking to recoup the thousands of dollars she owes.

The Star's investigation found another problematic state law that doesn't receive as much attention as the one governing payday loans. The Small Loan Act can also trap the poor into crushing debt, as it did in the case of Gregory Rogers, an illiterate Anniston man. The Small Loan law caps interest rates at 36 percent, a figure which only looks good when compared to the astronomical 456 percent allowed by the payday loan law.

Not surprisingly, payday lenders go where the promise of return is highest. In a paper published this spring by Catholic University's Law Review, Christopher Peterson and Steven Graves constructed a map showing the density of payday lenders per 10,000 people. (A digital copy of the map is online at www.csun.edu/~sg4002/research/usury.html)

In Alabama, the density of payday lenders is 2.712 per 10,000. That's the second highest in the nation, just behind Mississippi, with a density of 3.834. Not surprisingly, the Magnolia State's regulation of predatory lending is as lax as Alabama's.

Said differently, according to progressive advocacy group Alabama Arise, our state has more payday lenders than it does McDonald's restaurants.

Nowhere to turn

Throughout the state's history of lax government oversight, followed by more stringent lending rules, followed by the current era of regulatory back-sliding, one constant has remained: A steady supply of cash-strapped Alabamians willing to accept the high interest rates associated with predatory lenders. Reformers and industry defenders alike agree that even if the state does away with predatory lenders, their prey will remain. Any solution to this problem must acknowledge this fact.

Short-term lenders provide a service for folks who have nowhere else to turn. The deal is quick cash in exchange for higher-than-usual interest rates and rapid repayment. Pay back the loan on time, the industry's defenders say, and there's no problem.

Often short-term borrowers are stuck. They can't obtain credit from a bank or by any other legitimate means. So they take a risk in return for quick cash.

So says Donnie Breed, owner of Donnie's Quick Cash in the Hollis Crossroads section of Cleburne County.

Listen to Breed talk about his customers and he starts to sound like a credit counselor rather than a short-term lender.

"You can't be ignorant," he says. "If you borrow money, you've got to have a plan to pay it back."

Breed makes his living making small loans, $300 on average. He doesn't earn a lot, he says, but it helps put his daughter through college. If applicants can prove they've had a checking account for more than a few months, they can borrow. On a $300 loan, Breed collects $52.50 in interest.

In exchange for that steep interest rate, Breed says, borrowers can get cash faster than a bank could process a loan application. That's if the bank would even bother to lend such a small sum, or if the customer's credit rating isn't in the ditch. He notes that bank fees for overdrafts and other financial slipups are not so easy on low-income folks either.

Breed uses a privately operated lending database to make sure a potential borrower isn't overextended with other payday lenders. But as The Star's series on predatory lending has shown, the state's $500 limit on these types of loans can and has been thwarted. Like others who spoke with The Star, Breed says the state needs a better, more comprehensive database.

He tells the story of one customer in need of several thousand dollars. After several missteps, Breed helped the man secure a loan at better terms from an-other lending institution.

"I have to get involved with these people," he says.

Breed understands first-hand the cruelties of the marketplace. He once earned a living at a Heflin manufacturing plant until it closed its doors and sent his job overseas.

"I was not going to move to Pakistan," Breed says, so with his severance pay and a bank loan he opened Donnie's Quick Cash in 2004.

His affection for his customers is real. Sounding like the eternal optimist, Breed says of those be-hind on their payments, "Most of these people will come around."

Microcredit alternatives

What brings customers to Donnie's Quick Cash? Plenty of reasons: money for a vacation, to pay the power bill, to visit the doctor or to bail a relative out of jail.

Breed agrees that the family borrowing spending money for the beach is different from the family needing $100 to take a sick child to the doctor.

Trouble is, for either genuine need or frivolous whim, Breed's customers and thousands like them in Alabama have nowhere else to turn. Payday loans are a last resort.

Some industry defenders and watchdogs alike warn: Put predatory lenders out of business, as other states have done, and be prepared for a spike in personal bankruptcies and other societal ills.

States must find avenues to extend small lines of credit to low-income Alabamians. The state then must require oversee these institutions with strict regulations, stronger interest-rate caps and a statewide database that can prevent consumers from taking out monster loans while already underneath monster debts.

The problems are numerous. The solutions are scarce.

Here are a few:

1. Short-term lenders need a central, state-controlled database to ensure that potential customers are not stretched too thin. As this editorial board discovered in countless cases, the $500 limit on payday loans is easily overcome.

2. Follow Anniston's lead in discouraging more predatory lenders from setting up shop. Quick-buck lenders already litter Quintard Avenue, Anniston's main commercial artery. Eighteen months ago, the city began denying new business licenses to such lenders. It recently renewed its moratorium.

Other Alabama cities wrestle with a glut of these lenders. As one economics professor told The Star, predatory lenders can crush a community's entreprenual spirit.

3. Microcredit. The best interests of the public and private sectors are served if needy citizens have an alternative to predatory lenders. Bangladeshi economist Muhammad Yunus has shown the way. The Nobel Peace laureate developed a banking system for developing areas that, in his words, "is offered for creating self-employment for income-generating activities and housing for the poor, as opposed to consumption."

Alabama could take a lesson. Its most financially desperate citizens — those in need of quick cash to visit the doctor, to repair the tire on the car or to get a small-business plan off the ground — need somewhere else to turn.

All of Alabama should be ashamed that so many members of the working poor are forced to use predatory lenders who shackle them in a cycle of debt with interest rates that are by their proper name "usury."

They need an alternative.

A public-private partnership could lend small amounts of cash at miniscule interest rates or even interest-free, a la Yunus' Grameen Bank, which has lent to 7.5 million Bangladeshis over 25 years. Among Grameen's requirements are that (a.) the need be genuine, (b.) the money be spent on socio-economic development as opposed to conspicuous consumption and (c.) the borrower be willing to lend a hand to those in need.

Something similar here involving, local and state government, social service and faith-based agencies as well as businesses offers a tremendous payoff, promising a life raft to those in legitimate need. Entrepreneurship would flourish as those with big ideas could have the $300 needed to start a small home business. A broken car or a sick child could be taken care of without massive debt.

In recognizing Yunus and Grameen Bank, the Nobel Committee Chairman noted, "Sustainable peace cannot be given unless large numbers of people have the opportunity to get out of poverty. Development such as this is useful in human rights and democracy."

If Calhoun County and the state of Alabama are rife with businesses that groups such as Alabama Arise, the Center for Ethics and Social Responsibility at the University of Alabama and the Center for Responsible Lending all consider rapacious to communities, then it is our leaders' duty to seek ways to protect residents.

For six days, the editorial board of The Anniston Star has preached social justice and reminded you of your moral commitment to help those who need it most. Amen. No matter your religious persuasion or your political position, all good men should agree that part of our duty as those who are blessed is to give back to those who need blessing.

But the writers of this week's series have taken their calling a step further. They have taken a stand against an industry they know little about, an industry they have never used or needed. In their fervor to help the poor, they have launched a campaign to take away the financial freedom of the thousands of Alabamians who — for countless reasons — need a cash advance on occasion.

I am writing as a representative of Borrow Smart Alabama, a group of more than 225 Alabama payday and title-lending stores that have joined together to encourage the wise use of short-term loans and to help the public better understand our services.

The Star has spun quite a web of tales this week, pulling at your heart strings with stories of elderly and disabled people who have gotten themselves in trouble with short-term loans. So, indulge me while I share one of my own about an Alabama woman named Kim.

Kim was a registered nurse with a decent salary, but she hated seeing large chunks of her hard-earned paycheck go toward paying mostly interest on the credit cards she had run to their limits. Her ticket out of debt was the completion of a 26-month program to earn certification as a nurse anesthetist. She qualified for financial aid and found some scholarship money, but in order to finish school she had to cut back on her hours at work, which meant being short on her monthly bills. In order to keep her debt paid while working her way to financial freedom, she used short-term loans.

(Check out a video of Kim at www.borrowsmartalabama.com, where she will tell you that she "feels very strongly that she could not have fulfilled that dream without the service of the short term loan.")

Kim's story, along with several others you will find on the Borrow Smart Web site, are the sort of stories you never hear about short-term lending customers. It is also rare that you are told that the average cash advance customer is 39 years old with an annual salary of $41,000. Hardly the disabled and elderly "victim" we are painted as serving.

While the writers of this series criticized the fees associated with our loans (typically $15 per $100 borrowed), they failed to mention that banks charge an average of $29 for overdraft and non-sufficient fund fees and credit cards charge an average of $37 for late payment — fees that customers often avoid by taking out a short-term loan. And, like our fees, these are not APRs, but are one-time fees for a service.

The writers of this series pointed to Georgia and North Carolina, where legislators have capped fees so low that short-term lending no longer exists. They failed to mention that an independent study by the Federal Reserve reported that "Georgians and North Carolinians do not seem better off since their states outlawed payday credit: they have bounced more checks, complained more about lenders and debt collectors, and have filed for Chapter 7 ('no-asset') bankruptcy at a higher rate."

The writers of this series also pointed to experts to back up their claims. Several times they reference the Center for Responsible Lending, though they failed to mention that the CRL is funded by a large credit union — the most outspoken competitor to short-term lenders. They also missed the fact that Veritec Solutions, which supplied the data CRL used, said in 2007 that "the CRL misinterpreted (Veritec's) data to come to flawed conclusions."

The writers of this series highlighted the short-term lending industry's big profits, pointing out that the industry has annual revenue of $6 billion. To add a bit of perspective, commercial banks have annual revenue of about $480 billion, savings banks $84 billion and credit unions $36 billion.

In a time when more and more people are reaching the breaking point and looking for ways to, like our friend Kim, secure a better future for themselves, our state Legislature certainly has a roll to play. Their roll is to ensure the availability of good jobs in this state, to demand fair taxes, to provide an education that sets our youth up for a bright future — not to take away access to credit that can help Alabamians.

Borrow Smart recognizes that our industry has a roll to play as well. Our roll, as we see it, is to treat customers with integrity, to make sure that every customer understands the conditions of his or her loan, to advise them wisely and honestly, and to provide extended payment plans when necessary. Our members have signed a code to promise these things and more. Find it at our Web site and on the walls of our stores. Furthermore, this year we will launch a community education program to help teach Alabamians about building good credit and avoiding unnecessary debt.

We welcome other ideas for ways that we can be a part of the solution to the growing debt in this country — the large majority of which is owed to credit cards and traditional lenders, not short-term lenders. But restricting financial freedom is not the answer. It hasn't helped consumers in other states, and it won't help Alabamians. We also welcome this debate and the opportunity to clear up the many untruths that have been presented as facts by self-serving groups like the CRL.

The writers of this series have talked about moral obligations, and our moral obligation is to stand up for the thousands of hard-working Alabamians who choose to use our services. We are committed to treating them with respect and to protecting their right to govern their own lives — a right they've earned as Alabamians and Americans.

For the last week, this paper has explored the impact of payday loans on working Alabamians. You've learned that Alabama law allows payday lenders to charge fees equivalent to an annual percentage rate of 456 percent for small short-term loans. You've learned how Alabama consumers, struggling with rising prices and flat earnings, turn to these legal loan sharks and find themselves trapped in debt for months or years. In hard times like these, are payday loans just a necessary evil?

Clearly, as the payday industry argues, conventional lenders are not filling the need for small, short-term loans. Until these products become available at reasonable rates, minimally regulated "fringe financing" will thrive. Anniston's moratorium on business licenses for payday loan stores is one approach to protecting consumers from this mushrooming industry. Arise members in Lee County have been working for the past year to convince financial institutions in that community to develop low-cost, short-term loan products. They are now developing educational material to let consumers in their area know that there are other, more affordable options than payday loans.

Community responses are encouraging, but substantive change will require action at another level — the Legislature. In each of the past two regular legislative sessions, bills have been introduced that would purportedly "reform" the industry. The bills proposed allowing consumers to cancel payday loans by returning the loan amount by the close of the next business day, to request an extended payment plan, to receive a rebate for early payment in full, and to prohibit payday loans to members of the military service or their families. Interestingly, they made no change to the allowable interest rate of 456 percent.

While some of these changes sound good on the surface, a little research quickly indicates that the payday loan industry itself has been pushing these same proposals across the country, hoping to end further efforts at regulation. According to North Carolina's Center for Responsible Lending, they do nothing to keep consumers from becoming trapped in a cycle of debt to payday lenders. A consumer desperate enough to pay an exorbitant interest rate for a short-term loan is unlikely to see an overnight shift in circumstances that would allow him or her to rescind the loan the following day. An extended repayment plan that costs more to use than taking out a subsequent payday loan is unlikely to appeal to low-income workers struggling to make ends meet. The same is true for rebates for early payment — they're good for those consumers who comply, but simple hard-luck arithmetic shows that few would be able to get ahead that quickly. And the prohibition of payday loans to military members and their families? Congress has already taken steps in this direction, capping interest rates on loans to service members at 36 percent and citing the never-ending debt cycle affecting many young military families as a threat to national security.

Advocates across the country will quickly tell you that nothing short of an interest cap will protect consumers. Last month, the Ohio Legislature became the 13th state to cap interest rates by imposing a limit of 28 percent on payday loans. Legislative battles over an interest rate cap have occurred in other states in recent years and without a doubt will ultimately prevail. When Georgia payday lenders ignored administrative prohibitions, the Legislature criminalized the transactions. The Attorney General of Arkansas in March of this year began enforcing a constitutional limit of 17 percent interest on payday loans. New Hampshire, Oregon and the District of Columbia have all moved in recent months to cap the allowable interest rate on payday loans. An analyst for investment banker Sterne Agee has said that the payday loan industry, which earned an estimated $4.6 billion in fees in 2005, runs "the risk of being shut out of making the loans nationwide."

Alabama has traditionally lagged behind the rest of the country in protecting low-income workers. We were the last state to guarantee tenants' rights. We tax our lowest earners more harshly than our wealthiest. And yet, in 1959, Gov. John Patterson championed the Small Loan Act to clamp down on the loan sharks of his day, proving that Alabama can force the pendulum to swing the other way. Only time will tell how long we will continue to allow vulnerable Alabamians to be exploited by legalized usury.