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BankWest pulls out; Advance America to cease payday loan ops in Pennsylvania
March 7, 2006 - Spartanburg, South Carolina
"We would like to apologize to customers in Pennsylvania for the inconvenience caused by this event and the reality that they will be forced to choose more costly alternatives." - Kenneth E. Compton, Advance America, CEO and President Advance America, Cash Advance Centers, Inc. announced that BankWest, Inc., the bank for which the Company markets, processes, and services payday cash advances and installment loans in its 101 centers in Pennsylvania, will cease its payday cash advance and installment loan originations as of the close of business on March 27, 2006. Advance America will continue through August 31, 2006 to service all payday cash advances and installment loans that are outstanding as of March 27, 2006. The Company has no plan to shut-down its centers in Pennsylvania and is exploring other options and product lines to meet customer demand in Pennsylvania. "We are disappointed to announce that the lending bank will cease its loan originations in Pennsylvania," stated Kenneth E. Compton, Advance America's Chief Executive Officer and President. "We would like to apologize to customers in Pennsylvania for the inconvenience caused by this event and the reality that they will be forced to choose more costly alternatives. Furthermore, the Company intends to continue to defend the legality of the agency business model and to promote direct regulation of payday lending." Advance America estimates that its net revenues will be negatively impacted by approximately $2.3 million for each month that the Company is not able to market, process, and service new originations of advances and loans in Pennsylvania. Center expenses average approximately $1.3 million per month in Pennsylvania. These expenses will be reduced to the extent Advance America only services advances and loans originated prior to March 27, 2006. If the Company is left with no alternative but to permanently close its centers in Pennsylvania, the Company estimates that severance, lease cancellation, and the cost to vacate the premises will approximate $1.9 million. In addition, there are two potential non-cash charges associated with completely shutting down Pennsylvania operations: (1) un-depreciated costs of signage and leasehold improvements of approximately $1 million, and (2) impairment of goodwill, the amount of which cannot be determined at this time. Advance America currently is not able to estimate what operational changes may be required in connection with, or the financial effect of, pursuing alternative arrangements that may be adopted to meet customer demand in Pennsylvania.
News Source
RTO Online, RTO Staff Writer
Related Stories - Advance America Cash Advance Centers Inc. (NYSE: AEA)
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- Payday lenders reinventing business model to skirt state law, opponent says [June 27, 2006]
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Related Stories - South Carolina
- Internet payday lenders targeted [November 8, 2006]
- Advance America gives $50,000 to United Way [October 20, 2006]
- Advance America to stop providing payday loans to military personnel [September 25, 2006]
- Advance America buying back stock [September 12, 2006]
- Save military, civilians from onslaught of predatory lenders [August 30, 2006]
- Advance America increases stock repurchase program [August 16, 2006]
- Advance America retreats [July 28, 2006]
- Advance America announces results of second quarter [July 26, 2006]
- Lenders cashing in on short-term loans [July 16, 2006]
- S.C. must rein in payday lenders ... [March 23, 2006]
- BankWest ... Advance America to cease payday loan ops ... [March 7, 2006]
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