A payday lender with outlets in the Rogue Valley has announced it will quit doing business in Oregon, adding to the exodus of short-term lenders in the face of new state regulations.

A payday lender with outlets in the Rogue Valley has announced it will quit doing business in Oregon, adding to the exodus of short-term lenders in the face of new state regulations.

Advance America, Cash Advance Centers Inc. plans to close its 45 centers in Oregon. Advance America has three outlets in Medford and one in Central Point. Employees said the centers here will remain open until Oct. 31, but they aren't offering new loans.

The company, based in Spartanburg, S.C., said the Oregon closures are "the direct result of a new law that has already prompted most of our competitors to close."

However, the company also said none of its Oregon stores were profitable this year before the new law took effect.

The new Oregon law, which took effect July 1, permits payday and car-title lenders to charge a $10 origination fee per $100 loaned, up to $30 for a loan of any size.

Loans must be for a term of at least 31 days and interest rates are capped at 36 percent.

Even with the limits, interest and fees can push the cost of such loans to the equivalent of an annual interest rate of more than 150 percent — still far less than the annual percentage rates that soared as high as 700 percent without the limits.

The laws also limit how many times the loans can be extended or rolled over and demand a waiting period so people can't get new short-term loans within seven days of the day a loan comes due.

"We saw annual percentage rates of 300 to 500 percent regularly," said Sarah Hackett, acting financial services manager at the state Department of Consumer and Business Services, which regulates lenders in Oregon.

As legislators debated strict regulation of title loan and payday lenders in 2006 and 2007, the short-term lending industry argued that it need to charge such steep rates to maintain profit margins and continue service to consumers in need, Hackett said.

Since the new laws took effect, the number of short-term lending licenses has dropped. State records show that on June 30, there were 329 outlets offering payday or title loans. As of Sept. 19, there were 205 such outlets.

"Some licenses were surrendered earlier," Hackett said.

The Oregonian newspaper reported the closure of at least 60 payday loan stores between June 1 and July 9.

Hackett expects the number of short-term lenders operating in the state to continue to dwindle. Georgia-based Northwest Title Loans, which operates title loan stores including one at 1244 S. Riverside Ave. in Medford, has challenged the constitutionality of the new laws, claiming that it isn't economically feasible to operate with interest and fee caps because its borrowers have such high default rates. That company, which is only doing debt collections in Oregon and not making new loans, has said it will close all its stores if it loses its appeal.

Advance America said in its press release this week that it had "determined that it is no longer economically viable to continue to operate in Oregon." However, it also noted that in the first six months of this year, before the increased regulation took effect, the centers in Oregon generated no gross profit.

Advance America also announced plans to close 31 centers in Pennsylvania because a court told the company's subsidiary there to suspend its current operations and discontinue one line of credit product. Additionally, the company has decided to close 27 under-performing centers in several other states.

Reach reporter Anita Burke at 776-4485 or at aburke@mailtribune.com