Complex Law :
John Oxendine is best-known as the state's insurance commissioner - a position the Republican has held since 1995. But Oxendine wears several hats that all involve protecting the public. He is the state's fire safety chief and the comptroller general. He jokes that he is also the "NASCAR commissioner," since he is charged by state law with overseeing the safety of the state's racing venues
As the official in charge of loans of $3,000 or less, Oxendine wields a lot of power over the small-loan industry - which is not so small. Nearly 1,000 storefront lenders operate across the state, and they make close to 3,000 loans a day. Unlike banks, small-loan companies do not take deposits; they simply extend loans. Players in the industry include Georgia-based chains such as 1st Franklin Financial Corp. of Toccoa and multinational giants such as CitiFinancial.
Oxendine's job is to make sure that small-loan companies play by the rules. He can fine or shut down those that break the law. He has the authority to decide how much they can charge for the insurance they sell
He also decides who gets a license to open a business - a provision in the law designed to keep small-loan companies from flooding the market. Oxendine said licensing allows him to keep unscrupulous operators out of the business. In addition, he said, limiting the number of companies protects consumers from the temptation of taking out too many loans.
But consumers may pay a price for a licensing system that inhibits competition.
Unlike banks and credit card companies, which seek customers by competing on price, small-loan companies in Georgia charge the same, industry leaders acknowledge - the maximum allowed under law.
The average consumer might have a hard time figuring out what a loan should cost. The law that dictates what small-loan companies can charge is so complex that it takes a computer program to determine what most borrowers will pay. The finance charges for every loan have three components: the interest, a loan fee and a maintenance charge
The finance charges range from an annual percentage rate of 78 percent for a six-month loan for $200 to a rate of 23 percent for a three-year loan for $3,000. These charges do not include the cost of the insurance policies added to most loans.
Oxendine said the charges permitted under state law offer borrowers a good value. "I am sure we could do some comparison with other states," he said, "but I do not think you are going to find that other states are cheaper than us." In fact, a state-to-state comparison found that almost every state is cheaper than Georgia, particularly for the smallest loans. Of the approximately 35 states that regulate small-loan finance charges, only South Carolina's maximum charges are higher for loans of $1,000 or less - a popular amount for borrowers. In 2003, three-fourths of the small loans extended in Georgia were for $1,000 or less.
In Georgia, a consumer who borrows $500 to be paid back over one year will pay $145 in finance charges. The same loan would cost $103 in Mississippi, $79 in Ohio and $67 in Vermont, according to Indiana-based Carleton Inc., which tracks state lending laws for the industry.
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