Gov. Ted Strickland, of the great state of Ohio, has signed a bill that punches the rapidly growing payday lending industry in the face. As we’ve mentioned before, the bill will cap interest rates at 28% and limits consumers to 4 payday loans per year. A typical payday loan charges around $15 per $100 borrowed on a 2 week loan, which works out to an interest rate of 391%.
“We will not tolerate individuals being exposed to exorbitant rates, which does contribute to the cycle of indebtedness,” Strickland said. In the past decade, payday lending in Ohio has grown from a few hundred stores to over 1,600. The bill will likely cause most of these stores to close and 6,000 people to lose their jobs. Ohio says these jobs aren’t worth keeping:
“We want to replace jobs that are taking advantage of people with jobs that help people,” said Ohio Senate President Bill Harris, an Ashland Republican.
The payday lenders were predictably angered by the bi-partisan effort to run them out of the state. A spokesperson for the Community Financial Services Association claimed that Ohio’s citizens had been betrayed:
“It is a sad day when the opinions of editorial writers and so-called consumer groups count for more than the opinions of the people responsible for putting lawmakers in office,” wrote DeVault.
The industry is trying to repeal the law with a signature campaign. According to the Plain Dealer they’ll need “241,375 valid signatures across 44 counties in the state in the next 90 days.”
Gov. Strickland signs payday loan limit [The Plain Dealer]
(Photo: DCVision2006 )
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@Bladefist: lol
@luminus:
Checksmart is the one I’m quoting. I’ve used them in a bind. I’ll admit it. I don’t have family I can ask if I find myself short for afew days, and my last job was terrible about paying me on time (or for my entire payperiod).
“$15 on $100 is based upon the idea that 1 out of every 7 people who get such a loan will not pay it back. Would you like to be in that business?”
That’s amazing. I did not know that. So, for every $90 a payday loan office brings in, they loose $100? Interesting. I wonder how all those payday loan places stay in business?
Ah, the power of made-up-numbers. You can win ANY argument with them!
@Bladefist: There is no sensationalizing of the interest rates. These loans are not 15% haha. They typically end up costing the borrower double or triple what they originally asked for. Im not taking sides but CNN.com did a good article on this industry recently:
When the CRL took the average payday loan principal as reported by state regulators and multiplied it by the average number of loan rollovers per year, it found that typical borrowers pay back $793 for a $325 loan.
There is on the behalf of Ohio legislators, either an appalling lack of understanding of this issue, or, there is a disgusting propensity for self-promotion at the expense of their governed state.
If the goal in this case is to save their helpless and foolish constituents from themselves, our “heroes” should have addressed overdraft fees that can reach into the tens of thousands of percent, (if we utilize the same absurd APR criteria). Bounced check fees as well can be a FAR worse deal for the consumer. So it seems obvious that consumer protection wasn’t the paramount issue at play.
And, considering that Ohio will now have yet another 6,000 plus unemployed out of this legislation-that they will need to pay unemployment, cover emergency medical bills from newly uninsured workers, lose out on income tax, subject the state to millions of square footage of vacant office space, endure additional bankruptcies on the part of now un-served consumers, vendors, merchants, etc.-one has to ask-”what’s in it for Ohio?”.
The only sensible conclusion one can come to is that Ohio’s ever more ripening corpse is a fine launchpad for political grandstanding. This legislation strips credit-challenged consumers of the ability to chose to fight for themselves against the banks-asks them to beg for help, or forces them into far worse financial alternatives-all at an enormous fiscal cost to the state.
But when you factor in that this legislation is saleable to the uniformed-that it makes bogeymen out of the payday companies, and that it will most likely be a net vote creator, it’s easy to make the decision to sell out your state and sell out the people you claim to champion.
@Joeyjojo:
You do realize they charge outrageous amounts for check cashing, money orders, postage stamps, phone cards, utility payments, moneygram/western unions and to send or receive faxes, right?
They’re not just about the payday loans.
@MrGrimes:
To break it down, it’s 15% APR (annual), compounded every 14 days at maximum (could be as short as one day). 15 x 26 (52 weeks per year/2) = 390%.
In the end it is still usury. Sometimes you have to protect people from poor financial decisions. Social Security exists for that purpose.
this is the bank of last resort for these people.$15 on the hundred is cheap for people with no credit,they are the ones who are hurt by do gooders in the gated communities!!
@zero_o couldn’t be more wrong.
Take a look at the list of folks urging a YES vote on HB 545:
[www.ohiocoalitionforresponsiblelending.org]
It’s a large coalition of 245 organizations that are working to fight poverty. These are Catholic & other religious charities, groups that help the homeless, and groups who run food pantries. Not a single bank on the list.
I was part of this effort, and I assure you, we were all volunteering our time on this as part of the work we do every day advocating for the poor. There was never a lobbyist or a bank representative at the table at any stage in this effort.
Meanwhile, the Payday Lending industry has MILLIONS in “lobbying muscle” and “PR dollars.” They spent a heck of a lot of money fighting HB 545.
Personally I actually have no problem with an industry hiring lobbyists to go represent them in Columbus or in DC when there is legislation that they feel threatens their bottom line. What I do have a problem with is when they deceive people into thinking it’s some kind of grassroots power-to-the-people movement.
Re: your assertion that “their customers are also not well organized or politically savvy enough to speak or counter the media spin.”
Well, actually the Payday Lending industry is so huge and profitable that they gave their employees a paid day off to go to Columbus to lobby against HB 545.
Additionally, at least one Payday Lending company had its clients sign letters to legislators (urging a no vote on HB 545), deceptively presenting it as part of the process of applying for their loan. The last report I heard (unconfirmed) before they were called out on it was that they had generated around 40,000 such letters.
Also, if you read the anti-HB545 posts on the blogs you’ll see the exact same talking points used over and over again, the only variation being the name used and whether the poster (likely some 19 year old who is being paid to be their online communications guy) claims to be the single mother of 5 or the single mother of 6.
“Media spin”? Every time my side (pro-545) got in the news, the media also included the Industry’s side. We heard “6,000 jobs” over and over again. They were extremely effective in pushing that figure.
Clearly, the Industry was well organized and they got their message out. Good for them. I would expect nothing less of a campaign that is so well-funded.
The pro- HB545 organizations did outreach the old-fashioned way. We simply asked our members who cared about this issue to contact their legislators and urge a yes vote. No deception, no paid day off.
This bill passed with bipartisan support because it was good legislation. Legislators had the good sense to see that the Payday Lending Industry should be regulated.
Folks who disagree and are upset about HB545 should take action rather than whine about it and spin tales of the poor downtrodden Payday Lending Industry. And if you really still believe that your side only lost because it wasn’t organized enough, the logical answer is to get organized and contact your legislators. ANYONE can make those phone calls, send emails, talk to their friends, etc. The Payday Lending Industry will be more than happy to give you talking points and phone numbers while they trap you in a 391% interest loan.
Regarding those who make the point that regular bank fees are outrageously high, I have news for you: Governor Strickland agrees. He was asked about this at the press conference at the signing ceremony of HB 545 and gave a straight answer on it.
One thing at a time though. It took a *very* long time to craft a payday lending bill that had teeth in it but would be able to pass. It would not have been smart to try to tackle regular banking fees in the same bill. Also, HB545 was basically an effort to close a loophole that the Ohio legislature created in the 1990s that exempted payday lenders from some of the regulations banks are subject to. So additional legislation that further limits regular banks is going to have to be a whole separate piece.
If folks who are upset about bank fees want to get their legislators to put together an anti-banking-fees bill, go for it! Call your Ohio Senators and Reps, build community support, write Letters to the Editor of Ohio papers, find out what if anything has been done in other states, find advocacy organizations that share your values who can partner with you on this goal, etc. That’s how we passed Payday Lending legislation and there’s no reason the same thing can’t be done with bank fees.
I disagree with the law because it still allows these idiots to stay in business. These guys are not an asset to anyone. They PREY on those people with very little money. And when they get the loan, they usually keep having to renew it because they don’t have the money to pay it off.
@Bladefist:
Uhhh…. you’re an idiot. that $15 per 100 is for two weeks. That means 26 cycles in a calendar year. Also, you don’t seem to unerstand that ALL interest rates are computed as an annual percentage rate. 15% of $100 is indeed $15. However that’s for 1/26th of the standard time frame for computing interest rates. FYI – 26 (number of cycles in a year) times 15 (percentage per cycle) = 390%. No compounding of interest at all. If the person borrowing had a rough time and had to keep taking out the loan every time they paid it off, they would pay $390 in interest alone in a year.
Here endeth the Junior High School Math lesson for BladeFist.
The payday lenders are lying to Ohio voters in attempt to overturn one of the nation’s best consumer protection laws in November.
Watch here:
.
The payday lobby is spending millions on TV to deceive voters and convince Ohioans that 391% amounts to financial freedom! 391% is not freedom, it’s a trap! Payday lenders need to acknowledge that their business is predicated on their ability to trap people in debt!
Payday lending is a scourge on our families, our communities and our economy! VOTE YES ON OHIO ISSUE 5!
[www.yesonissue5.org]