Ohio Proposes Punching Payday Lending Industry In The Face

The Columbus Dispatch says that Ohio lawmakers are getting inexplicably tough on payday lenders. Have people finally had enough?

Stunning both the payday-lending industry and consumer advocates, House Financial Institutions Chairman Rep. Christopher R. Widener, R-Springfield, made major changes yesterday to a plan he introduced last week that did not lower the current 391 percent rate.

Widener introduced House Bill 545, which would cap payday lending rates at 28 percent, limit borrowers to four loans per year, cut the maximum loan size from $800 to $500 and require that borrowers get at least 31 days to pay off a loan.

“I’m proud of where we are at with this bill, and I think we’ll have the strongest law in the country,” he said.

If enacted, the bill could spell the end of the burgeoning payday lending industry in Ohio, which has grown from 106 stores in 1997 to more than 1,600 today. The bill would attempt to encourage banks to participate in a new small-loan program though a partnership with the state treasurer’s office.

The Dispatch says that Ohio payday lenders currently charge about $15 per $100 borrowed for a two-week loan. The bill would limit the rate to less than $2.50 per $100 on a one-month loan.

GOP bill stuns payday lenders [Columbus Dispatch](Thanks, Andrew!)
(Photo:meghannmarco)

Comments

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  1. laserjobs says:

    Let me guess this has been lobbied heavily by the banks

  2. EyeHeartPie says:

    Awesome…always hated payday loan places taking advantage of people needing a short term loan for an emergency.

  3. bohemian says:

    @laserjobs: I doubt the banks want it. Many of them are behind the payday lending chains.

  4. laserjobs says:

    Banks get the business and the losses are guaranteed by the state treasurer’s office (or simply the taxpayer).

    Another bid for the banks to get a bigger piece of the pie all while privatizing the profits and socializing the losses.

    Taxpayers lose!!!

  5. AMetamorphosis says:

    KUDOS to: House Financial Institutions Chairman Rep. Christopher R. Widener, R-Springfield !

    Payday loans are a debt trap for which most uneducated users get stuck in and can never dig out of.

  6. nerdsavant says:

    Unless something has changed, I’m pretty sure it’s just the Columbus Dispatch, not the Post-Dispatch.

    And now, back to not having anything better to do.

  7. speedwell (propagandist and secular snarkist) says:

    Wonder what recourse educated Ohio borrowers who do not qualify for regular short-term signature loans at banks (i.e. me, if I was an Ohioan, due to lack of credit history) have now. Not that I anticipate using these loans, but in the unlikely event I ever did need to, the option would no longer be available.

  8. @bohemian: That is, many of them are in on it. Just clarifying.

  9. chrisjames says:

    What a ridiculous thing to do: offer someone a service for a price. We don’t think this service is cheap enough, so let’s make some laws to make it cheaper. Socialism ahoy!

  10. vladthepaler says:

    Is there anything in the law to prevent them from charging a $12.50 “appplication fee” (or some other such nonsence) for the loan? If not, it’ll be business as usual with a little change of terminology.

  11. surgesilk says:

    @speedwell
    Well if you don’t have $800 and you have no credit history I would say you are exactly who this would be wisely targeting.

  12. dlynch says:

    the average person who takes one of these loans rolls it over 5 times. though they do provide a service, ohio’s payday lenders are a leading cause of bankruptcy filings in the state….

  13. howie_in_az says:

    @AMetamorphosis: Then shouldn’t Ohio be educating consumers instead of limiting their options?

  14. AMetamorphosis says:

    @howie_in_az:

    Ever heard of usury laws ?

  15. TheUncleBob says:

    >”Have people finally had enough?”

    No, if people had enough, they’d simply stop using these places.

    Hey Ohio lawmakers – how are your government ran schools going? Pollution levels? Unemployment rate? Government corruption?

    But let’s focus on restricting legal cash transactions… that’s a good use of taxpayer money…

    Speaking of which, any idea what percentage of the average Ohio resident’s paycheck goes to taxes? I bet it’s more than what a payday lender takes…

  16. tmed says:

    I think there has to be a middle ground of allowing these loans without killing the industry (which a 28% will – these are short term loans).

    These pull money from the banks in fees, since payday loans avoid floated checks. The banks make it back by being the investements behind the payday loan places.

    Unless wages move up, the american people are screwed anyway.

  17. SuperJdynamite says:

    @speedwell: “Wonder what recourse educated Ohio borrowers who do not qualify for regular short-term signature loans at banks (i.e. me, if I was an Ohioan, due to lack of credit history) have now.”

    Putting aside the fact that if one were “educated” on the matter they wouldn’t have questions, here are six possibilities:

    1) Get a credit card.
    2) Save some money.
    3) Borrow against a retirement fund.
    4) Ask a friend.
    5) Join a credit union and get a loan against property.
    6) Ask about financing options with the doctor/mechanic/vet/contractor/bookie/whatever your emergency is.

  18. cbartlett says:

    Dear government: Please keep your hands out of private business.

  19. Loki_Monster says:

    @bohemian: Most payday lenders I’m aware of are not backed by banks.

    Payday lending is high-risk, high-default shitty business that banks don’t want. I doubt if banks will even want in on the action since the loans will generate so little interest in comparison to the cost associated with generating and servicing the loans. If this type of loan were profitable, banks would already be doing them.

    Rep. Widener better look at the default rates of payday loans before he pledges Ohio taxpayers’ money to guarantee them.

  20. Loki_Monster says:

    @Loki_Monster: Oh, but I forgot, these types of loans WILL be profitable now because Ohio taxpayers will be paying for each and every default.

  21. ShirtNinja says:

    This is awesome. Sheer bloody brilliance!

    These places prey on the desperate and destitute, and any bill passed that will rein them in is 110% alright in my book. I hate these places with a passion, and I absolutely refuse to use them, even for just cashing cheques.

  22. TheUncleBob says:

    @SuperJdynamite:
    >1) Get a credit card.

    So, you’re going to tell someone with no/bad credit history to get a credit card? Hell, some of those fees run more than a pay day loan…

    >2) Save some money.

    If they had money to save, they wouldn’t need to borrow it.

    >3) Borrow against a retirement fund.

    If you have one. Then, when you’re unable to pay it back and go to retire, you’ll find that all the short-term lenders are out of business…

    4) Ask a friend.

    “Ask a future enemy.”

    5) Join a credit union and get a loan against property.

    Generally, the type of people who “need” payday loans don’t have much in the way of property.

    6) Ask about financing options with the doctor/mechanic/vet/contractor/bookie/whatever your emergency is.

    Wonder what the limits to fees charged by your bookie are….

  23. chrisjames says:

    @SuperJdynamite: Never do 3 or 4. Both have consequences much nastier than getting a payday loan. Well, it’s all relative, but it’s generally better to just eat the interest than attempt either of those in an emergency.

  24. womynist says:

    I am a social worker who works with low-income and homeless individuals & families. I can say that these predatory lenders are a big part of the reason why the poor stay poor–they can’t get a loan anywhere reputable because their credit is already in the shitter for whatever reason, and they’re living so marginally that these payday lenders are the only option. Then after they roll it over a few times, they’re stuck in a cycle they can’t break. I live in a small city and there are like 6 of these places on the same 5 mile stretch of road. Shame on these companies for making money off of the nation’s poor. Why doesn’t the government just make them illegal?

  25. firesign says:

    @cbartlett: one payday loan vampire heard from.

  26. Snarkysnake says:

    I suspect that the industry that sells this crap was “stunned” because this politician either couldn’t be bought or wouldn’t stay bought.

    All of you advocates of predatory lending are just parroting a bunch of nonsense put out by this industry.Lower costs loans are already available for these people-they are called credit cards and signature loans and the like. The companies that provide them make plenty of money. Now, the people that can’t get credit cards don’t need a dose of this financial poison to make their bad situation worse.They need to be WITHOUT CREDIT for a period so that they can get their lives in order and get a real credit account instead of these mantraps.

    Pain ? Yeah, there will be some pain as they can’t have the immediate gratification of that hot money in their hands. But like most remedy’s,you have to take your medicine before it will do any good.

    And please,no posters saying that they need the money for “the children” or I’ll go postal. These things are chattel slavery. No more and no less…

  27. Coelacanth says:

    @chrisjames: What about borrowing against a Roth IRA? The interest you pay back goes directly back into your portfolio.

  28. Bryan Price says:

    Columbus Post-Dispatch??

    I didn’t get the memo on the name change! :)

  29. chrisjames says:

    @COELACANTH: Hmmm, I hadn’t thought of that. I had written off Roth IRAs considering if you follow the golden rule of not drawing against your IRA. But it’s a sweet deal in an emergency. Good call.

    #3 amended.

  30. uberbucket says:

    Although a 391% interest rate sounds obviously ridiculous, there are others states where there is no interest rate limit. Basically any “agreed upon” rate – whether it be 10% or 1000% – is kosher.

  31. rhombopteryx says:

    @cbartlett:

    Yes.
    Your annoying nosing around in my private heparin-cutting business is annoying. If I want to cut my heparin (or piss on my meat, or steal from my employees) and I can get away with it, why are you nosing around and making laws against my money-making activites?

  32. Parting says:

    Ok, now when they are going to be ”tough” on credit cards??? Huh? Or the lobby group is too important to be bothered?

  33. BigElectricCat says:

    @cbartlett:

    Dear business: act ethically and we won’t do a procto exam on your books.

    Love,

    The Government

  34. Squeezer99 says:

    a business provides a needed service and the government wants to restrict that? wow.

  35. hegemonyhog says:

    @Squeezer99:

    A “needed service” can include murder. Or theft.

  36. pastabatman says:

    @TheUncleBob:

    thanks for saving me the trouble of explaining to superdynamite.

    i also don’t get why banks would like this. a vast mojority of people would use a bank over a payday NOW anyways.

  37. pastabatman says:

    majority

  38. lihtox says:

    @chrisjames:
    * “I only want to offer people money for those spare kidneys they’re not using! I’m providing a service!”
    * “Next, the government will be telling me that people can’t sell themselves into slavery to pay for their child’s education!”
    * “Come on down to Bob’s Fish Shack! We have the lowest prices because we don’t waste money on frills like sanitary conditions!”

    The government has always limited the options of the cheap and the desperate, and I for one don’t think that’s a bad thing.

  39. chrisjames says:

    @lihtox: Offer money for spare kidneys? Is there something wrong with that? Someone wants to sell themselves into slavery? If that’s the case, then why not let them? If that’s a crack at the education system, then maybe you’re looking in the wrong direction.

    And I get the tired old argument of consumer protection. The people (i.e. the body represented by the state, the government) obviously want this service. Why not privatize it? Does that automatically void any worth? Are federal and state programs proving their worth, or are sanitary conditions continually proving to be poor nationwide? Ever heard of “Kosher?”

    That’s all extremist anyway. All systems need moderation before change, and Ohio mandating the operation of the payday loan industry is a big misstep. Would you prefer the “public” mandate your business too, or just everyone else’s?

  40. luminus says:

    I worked for the largest payday lender in Ohio a few years back. This law will never pass – just before I left the old man sold this 15-year old business for something like 180 million. They’ve got the cash to make sure it doesn’t crumble. (Although it did crumble in Indiana a few years before that, thanks to these laws… costing him a pretty penny…)

  41. Jeff asks: "WTF could you possibly have been thinking? says:

    I hate to pee in the pool, but I find payday lenders to be a useful tool occasionally.
    When I need a couple hundred bucks for parts to finish a job, I don’t want to fill out a bunch of loan papers and wait a week, I need to get it done now.
    But unlike most of your scum scraping bottom feeders, I know I will have it to pay back when the job is done.

  42. Jcakes says:

    Payday loans are skanks.

    If you are needing a payday loan because of an emergency, that’s a telltale sign you need an ‘emergency savings’ fund.

    Otherwise they are loan sharks

  43. stinerman says:

    @cbartlett:

    Dear sir,

    Unless you’re a citizen of the state of Ohio please kindly STFU. If we want to make our state a Communist Workers’ Paradiseâ„¢ or any thing else for that matter, it’s none of your concern.

    HTH

  44. stinerman says:

    @luminus:

    Really? It passed the House pretty easily and the Senate is “expected” to pass it as well. Strickland certainly won’t veto it, so I’m not sure who you think will stop it.

  45. stinerman says:

    @TheUncleBob:

    Give us time. We’re still working our way out of one party rule. Back in 1994, the Democrats were very close to losing status as a political party in the state because of their (lack of) electoral success.

    Bankrate has a nice chart of Ohio tax rates. The government takes a relatively large chunk as far as states go, but then again we have to repave our roads every 2 or 3 days due to the weather here.

  46. Soldier_CLE says that Hideo Kojima has to make MGS till the day he dies! says:

    As an Ohioan, I believe that this is a great idea that is a win/win for both the Ohio Republican Party, and for Ohioans, in general.

    Most, if not, all payday loan shops that I have seen in Ohio are interestingly enough, located in some of your areas where predatory payday loaning can target the lower to working income families, which I feel adds on to our nation’s economic crunch. By putting the cap on the loans, it gives Ohioans who were unwise enough to fall for the payday loan trap a chance to get back on their feet, and effectively give them
    a chance to get back into the black, thus helping Ohio’s economy.

    Republicans in the state assembly did something pretty smart, in that it draws attention to them in a good way, having been shown all throughout Ohio’s news stations as having spearhead this bill. Democrats (and Republicans) would be compelled to pass it, as it as a “Nay” vote would come down upon that politician, when it comes down for reelection.

    I fail to see how people would be against this, unless they have an invested interest in payday loans.

  47. Soldier_CLE says that Hideo Kojima has to make MGS till the day he dies! says:

    @stinerman: Very true… I still never understood how the Ohio Democratic Party had failed to keep The Governor’s Mansion, after the great administrative efforts of Dick Celeste in the 80s.

    Then again, anything that reaches Lodi and below for one reason or another were traditionally Republican in “The Buckeye State”.

    As far as the taxes, I can say that part of the reason why we have such high taxes is because of the abomination that were the Taft administration, having spent way more than we could afford, and having committed to worthless projects, that in part were due to the attempted privatization of agencies, that only proved sub-par in quality and quantity for the taxpayer buck. One example? That privatized prison mess in Youngstown.