Oxendine challenged over handling of small-loan licenses

A Middle Georgia small-loan company has accused outgoing Insurance Commissioner John W. Oxendine of improperly awarding lending licenses to political supporters.

Middle Georgia Management Services, a loan company owned by state Rep. Rusty Kidd (I-Milledgeville), filed suit this week in Fulton County Superior Court seeking an injunction to force Oxendine to stop issuing small-loan licenses that do not meet the requirements of the law.

The suit says Oxendine is failing to follow state law when issuing licenses and is flooding the loan market with unqualified businesses who got licenses "solely as a result of generous campaign contributions."

Oxendine denied the allegations in an interview with The Atlanta Journal-Constitution. He said his office has complied with the law when processing recent applications.

"We have gone 100 percent through the normal process," he said. "We haven't done anything different whatsoever."

Oxendine, whose term ends this year, supervises the state's small-loan companies under the Georgia Industrial Loan Act. The loan companies are not banks, and they do not take deposits. They are storefront lenders who can make loans of $3,000 or less. Their customers are usually people with poor credit who can't get a credit card or obtain a loan from a traditional bank.

A complicated state law dictates how much small-loan companies can charge and grants the insurance commissioner the authority to hand out licenses. The commissioner must limit licenses by geography so that a city or town isn't flooded with lenders, according to the law.

The lawsuit says that Oxendine has awarded 20 improper licenses this year to EquityAuto Loan LLC, which is a Savannah-based company operated by Tracy Young. The court filing includes a document showing a total of 37 new licenses issued this year and 12 others pending.

Besides Young's small-loan companies, he is one of the state's largest car title lenders. Campaign disclosure reports confirm that Young contributed $15,800 -- the maximum -- toward Oxendine's unsuccessful run this year for governor.

Young could not immediately be reached for comment.

EquityAuto Loan is the only company named in the filing, but the complaint also names "John Doe" companies who have yet to be identified, but who also improperly obtained licenses.

Oxendine said there has been an uptick in the number of licenses issued and acknowledged that quite a few have gone to EquityAuto Loan. But he said most of those applications are for offices to be opened in large metropolitan areas of the state that easily have the populations to justify the new licenses.

Oxendine said applicants who pass the financial and character requirements for running a small-loan company will get a license if they request a location in a large city. He said the campaign contributions had nothing to do with the licenses being extended.

"You can put in the paper right now that anybody out there that wants a license in metro Atlanta, they just need to send in an application," Oxendine said in an interview.

Oxendine said he believes the court action is related to his effort to bring some minor reforms to the small-loan industry -- including limiting some of the products that small-loan companies sell with their loans. While the state sets the amount of interest that can be charged for a small loan, it allows the loans to be packaged with insurance policies and other products that usually drive the effective cost of borrowing over 100 percent.

"I think our attempt to make some improvements is probably what has brought about this lawsuit from Rusty," Oxendine said.

Kidd, the Milledgeville legislator, operates a chain of 17 small-loan offices in Middle Georgia. He said his company sued to stop Oxendine from ignoring the requirements of the loan act.