CONCORD, N.H. (AP) – New Hampshire’s banking commissioner has denied a payday lender’s request to charge 365 percent interest on open-ended lines of credit.

Banking Commissioner Peter Hildreth ruled Tuesday that South Carolina-based Advance America Cash Advance’s proposal was unreasonable and predatory. The payday lender had fought New Hampshire’s 6-day-old law capping annual payday and title loan rates at 36 percent.

Under its new proposal, Advance America wanted to loan money under another section of the banking law that covers small lenders and does not cap interest rates. Advance America proposed charging between 365 percent and 456 percent in annual interest, depending on whether the borrower allowed automatic payment on the loan.

Hildreth said a consumer who borrowed $500 for a year and only paid the 365 percent interest would pay $2,325 in interest payments. He said that was oppressive. At the 456 percent rate, the same consumer would pay $2,780 in interest payments over a year.

“Brought down to its basic level, it just is not fair,” Hildreth said.

Advance America spokesman Jamie Fulmer said the company generally did not agree with Hildreth’s interpretation of the law and was considering its options. Hildreth said the company could appeal to the state Supreme Court.

“We remain committed to offering consumers access to credit products and high-quality service in a competitive marketplace, while doing everything we can to protect the jobs of the approximately 50 New Hampshire citizens who we employ,” Fulmer said in a statement.

A state law took effect Jan. 1 capping the interest rate on payday loans at 36 percent a year, which the industry said would put it out of business. Advance America said last month it would comply with the new law, but proposed the new loan product that the company said was neither a payday nor title loan and consequently should not be bound by the law capping interest rates at 36 percent.

Payday lenders typically charge $20 per $100 for two-week loans backed by the borrower’s car title or next paycheck. That amounts to an annual rate of 521 percent.

The cap translates to a daily interest rate of about 0.1 percent, or total interest charges of $1.38 – a dime a day – on a $100, two-week loan.

Advance America had proposed establishing $500-$750 lines of credit that borrowers could tap in small increments, with $10 being the smallest withdrawal. Advance America said the credit offering was covered by a section of the banking laws for small lenders that does not cap interest rates.

Hildreth said the state has a lot of lenders that fall into that category, but none have charged more than 50 percent in annual interest including loan penalties assessed on their borrowers.

Most offer small loans, such as $5,000, paid in monthly installments, he said. The lenders do credit checks on borrowers so they can charge low rates.

In his ruling, Hildreth said Advance America’s proposal would be an unfair trade practice. He said the proposal’s terms and conditions were vague and thus deceptive.

“The determination of unfairness and deception renders the company’s argument regarding the type of loan – small loan vs. payday – moot,” Hildreth wrote.

Hildreth said the Legislature’s enactment of the 36 percent cap reflected its policy on such high-interest loans as being unfair.

“The unfairness was not that the loans were called payday or title loans. The unfairness was because of the interest rates charged,” he wrote.

Hildreth said the ruling should serve as a warning to any other lenders with similar, high-interest products.

“It should, in fact, be a warning to them that they should check with the department before charging the rate,” he said.

Otherwise, they could face a similar ruling, he said.

“I am pleased that the banking commissioner has fully embraced the intent of the Legislature to prohibit predatory lending practices,” said House Speaker Terie Norelli.

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