I'm against this, honestly. If there were no banks or other substitutes for this lending, then sure.

But if a person is so high-risk that they can't even get a credit card and/or manage their cash cycle well enough to come up with the money, then I think it's fair to charge high "fees" (and whatever related APR that means) to make the loan.

$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?

Very likely they will spin the signature campaign and hit all the low income areas. Great this happened though finally. Ohio will hopefully set a standard for the industry.

Put this thing up for vote if they want to whine so much about it. Ads will come out by the state itself showing why regular citizens should have this law. It'll pass no questions.

Why can't they operate with the 28% cap? Did they really need to charge 300% interest? What did they think would happen.

I have mixed emotions on this one. A business getting $15.00 for a $100.00 loan with no collateral and high risk doesn't seem that unreasonable.

Yes, annually it's a staggerinly high interest rate, but how can a business exist on less? 28% annual interest, when the loan is only for a few weeks works out to pennies.

Take $100.00 out of an ATM and you can easily pay $5 - $6 bucks in "fees", but this is perfectly acceptable.

Either these business will die, or like ATM machines, and airlines, they will invent non-interest fees and charges that will cover their overhead. Just a lame shell game that let's legislators crow that they did something, with no real change.

the $15 on $100 = 391% is a little bogus.

What is 15% of $100? $15? I love how whoever originally wrote that in a way to sound horrible. I'm guessing they looked at it from a yearly standpoint, and calculated it back, with compounding interest or something. I'm not even going to attempt to figure out how they got that #. Unless there is a shit ton more fees on that 100$. But I don't see the fees adding up more then original amount.

Look, its a payday loan, not a home mortgage, not a line of credit. It's a short term loan. $15 for $100 is 15%. End of story. Quit sensationalizing.

So credit card companies can still charge whatever the hell they want and like SkokieGuy says you still have huge ATM fees and people who don't have a checking account will still have to pay a portion of the check to the bank for check cashing fees, I bet this was lobbied for heavily by the banks (who aren't financing these companies or own them I'm looking at you Wells Fargo)

@SkokieGuy:

Where do you find $5 ATM's? I get 4 withdrawals free a month, and generally, ATM's around this area cost $1 - $2.

@Bladefist: Yep

1. The APR extrapolation assumes that some person (we'll call him "Idiot") rolls this 2-week loan over for an entire year and the lender keeps charging the same fee (which is probably an origination fee).

2. The lawmakers are probably all comparing the extrapolated rate against a home or car note, which would indeed be pretty extravagant. That'll pull some heart strings.

I'm not trying to be an advocate for these lenders, just trying to see it from their side.

@zero_o: Of course it was. The banks and financial institutions are a huge and well funded lobbying group. Payday lenders are more likely independent operations without lobbying muscle or big PR dollars.

Their customers are also not well organized or politically savy enough to speak or counter the media spin.

@Bladefist:

It's a short term loan. $15 for $100 is 15%.

@xerent: ATM's are typically charging $2 - $2.50 a transaction + the fees by your own bank.

Yes, if you use the right ATM and have the right type of account, these fees may be waived, but the consumer of a payday loan is less likely to be financially savy and / or have the luxury of choices.

@zero_o: Credit card interest rates are limited to the Usury laws of the state they are incorporated in, which is why most of them are incorporated in Delaware. Even with those lenient laws, the highest interest rates is around 28-30%, pretty much the same as this law requires for payday loans. All this law does is make payday lenders work under the same restrictions as banks/credit card companies.

@Manok: The interest rate cap isn't the problem. The limit of 4 loans per year is the problem.

Remember that this $15 fee may save the consumer $100 in other fees. If that $100 allows someone to send in a minimum payment on time to 3-4 different bills there could be a huge savings. Noone forces people into these loans. People take these loans because it is cheaper than the alternative. Obviously of you roll over a loan 40 times in a year that is going to hurt but in a capitalist system we have to allow people to make their own choices.

Also remember that this $15 is not technically interest but rather a fee. I can easily assume that the loan origination incurs $5-$10 in direct admin costs that are completely separate from the risk premium paid by the consumer.

Nobody wins but the banks. This was a law targeted to close an industry, not control it.

On top of the interest cap, there was a limit to the number of loans you could get in a year, how'd you like that on a credit card?

If the evil politicians had worked with the evil lenders to come up with a compromise that would have kept them in business, the evil banks who fund the politicians would have been upset.

The industry had a demand, the law does not fix the cycle of indebtedness, it will simply cost these people more in bad check fees rather than usurious interest.

Someone was getting in on their racket.

Being an Ohioan, I've used some of these loans in the past, albeit responsibly. I'm not quite sure I agree with this legislation, although I've already seen some lenders start to work around this. Instead of charging $75 interest on a $500 loan, they will only charge $10 "interest" and a $65 "loan origination fee". So they stay under the 28% in pure interest, but they would have you believe it costs about $30-65 for them to do the paperwork to start the loan off in the first place. I eventually joined a credit union which competes with the payday lenders by only charging $8 to loan a customer $500. If all of the payday lenders dry up and leave, I wonder if my credit union will still offer that service since it will have no one to compete with?

@MayorBee: @Ash78:

Right, exactly my point. You can't roll everything into an APR, if its rarely ever going to be over a month. This is dishonest to say its 391%.

Should we manipulate all the interest rates to make them sound this bad? Instead of calculating my home loan rate yearly, I'm going to calculate it over 30 years. Well holy crap, I'm paying an outrageous rate. Government! Government! Take my bank to jail! They're taking advantage of little ol me, on noez, i cant make decisions on my own. helpppppppppppppppp

This law places restrictions on the consumer. How is that a victory for consumers?

No one's arguing that payday loans are a good financial decision. But this is a stupid solution. If people want to help folks that get screwed by this industry, they should contribute to a nonprofit that will aid people in need interest-free...I know many churches do this, and community care type centers.

Banks get away with $35 fees for being $1 overdrawn. Is it not better to borrow $100 for $15 for 2 weeks before your next paycheck?

Banks have lobbied this bill for sure and watch for banks to offer a replacement product in a matter of months that ends up costing more than the payday lenders. Be careful what you wish for.

Ok great Ohio you just busted the payday stores. All you did was move the payday loan operations underground where it will be controlled illegally by criminals. Poeple will still need the loans they will just get them from loan sharks instead of legitmate business that pay taxes and employ people. Good job Ohio.

@Bladefist: As I said, interest rates are commonly annualized so they can be compared apples-to-apples.

Credit card statements show your APR, the daily amount of interest charged, and the effective rate of interest applied to what you owe at the time. By your logic, credit card statements shouldn't have to print the APR because some people pay off their cards every month.

As for your mortgage, how did you decide on which rate was best for you? Did you have to whip out your calculator and figure out how much the APR was for each lender because some presented it in a daily rate (wow, that's a great rate, just pennies on the dollar!), while some gave you fortnightly rates, and yet others gave you real life examples (i.e. dollars you'll pay in interest over the life of the mortgage at $x principal)? Somehow I don't think so. The interest rates were, by financial standards, presented in an APR format so you could compare them to each other.

@Bladefist: "Rarely over a month" is a stretch there as well. These loans quite often stretch on for months and years since the customers who get them need the money after payday just as much as they needed it before.

And nobody is being dishonest and picking and choosing loan term limits. The A in APR means annual; it's an accepted standard. Saying that it's similar to calculating your home-loan interest over 30 years is what's dishonest. My credit card lists an APR even though I pay that every month as well.

@laserjobs:

Banks are wrong and exploitative to charge those kind of fees too. It's time to crack down on all of this to "assure an even playing field" as the lobbyists like to put it.Loophole proof caps on this kind of robbery would be a good thing. As for the " it will only hurt the people its designed to help " bullshit,it's hard to see how consumers would be any worse off if banks and other financial service providers were tightly regulated like they used to be .

I'm going to jump on the bandwagon and say that this is stupid. It flies smack in the face of being a good consumer - this is the people saying, "We're too stupid and naive to help ourselves, government, please help us!"

This is, by it's very nature, a risky business. These aren't people who have savings - these are people living paycheck to paycheck. They're going to go from having at least SOME place to borrow money from to no place. And yes, while this may cause some of them to wise up and start saving more, I feel like the vast majority will just borrow money from even seedier sources.

You can't legislative common sense.

@eighth_note: Actually, it's a combination of the two, but the low interest rate is the killer. The dubious intention was to force payday lenders to offer flexible products to stay in business, but without becoming a full-fledged bank, they simply can't offer better rates than what they were. The 4-per-year limit is just chopping up the dead bodies so they'll fit in the trunk.

This whole campaign is dripping with the slime of lawmakers that aren't getting the picture. The consumer opinion was tailored around scare stories of people that took 2-week payday loans, then spent months and months paying them off. This may be a volatile form of credit, and an exploitative industry, but it's underscoring the idiocy of the people getting into these messes. Yes, it is the consumer's fault, because they tried to abuse the loans and got in deep trouble. If the payday lending centers were misrepresenting themselves, punish them, but nixing an entire industry is a dangerous move; it only bolsters others and lets big business dig its claws deeper.

Does anyone else see the charges for overdrafts as a strange loop-hole loan that banks can charge outrageous rates on? If you go over $1 they will charge you $35 for that $1. To me it seems like the bank is loaning you the $1 plus the $35 'charge' without asking you first and doing it to the people who don't have the money to pay it in the first place.

@Shadowman615: @MayorBee:

Look, I agree / Understand. But the only data in the article is the 391%. Is there anyway, the government in Ohio is taking advantage of that number? Anyway its being used to sensationalize? Fine, APR is standard. Could they also include the typical rate for the average pay-day-loan user? Well its 391% annually, but, for the average 14 day borrower, its 15 friggin percent. See not that hard?

@Bladefist: Fail. APRs are calculated on an annualized basis. That's where the "A" comes from and is what people generally mean when they talk about interest rates.

Also, the vast majority of payday revenue comes from a small pool of habitual borrowers. Many of these people make stupid decisions, many are very unsophisticated, many are trapped in debt cycles...and surely many are irresponsible. But there are and should be laws that protect unsophisticated, uneducated people from those who desire to rip them off. That's why I'm not a Republican (anymore) and, presumably, why you are.

@Bladefist: Nope. 15% over 2 weeks is 391 percent. Period.

Facts are facts. If you feel a fact is sensationalistic, perhaps what you mean is that it is sensational, which I agree with. Not that hard.

Who cares about the payday lenders going out of business. It is only 6,000 jobs. Ohio doesn't need jobs. GM announced this AM they are closing a plant in Ohio causing the loss of 2,300 jobs. DHL is looking to move some jobs outside Ohio.

What's another 6,000 jobs?

Between those jobs, the jobs lost by the non-smoking bill, the jobs lost by the anti-strip club bill, and steel and manufacturing jobs fleeing out of Cleveland and Youngstown at alarming rates, coupled with the highest foreclosures in the Country.

Ohio is hostile towards business and the loss of jobs is helping drive this state into the toilet.

Payday lending legislation doesn't do anything to deal with the underlying issue of people who need money and now don't have options.

Banks and credit card companies have to be dancing in the streets thanks to late fees, bounced check fees, over the credit limit fees, etc that will make a $15 fee on a $100 payday loan look like nothing.

Sad.

@hi: Actually I think that's a pretty good point. If revenue is structured as a late fee then the gloves are off, as far as I know. But payday borrowers pay those rates for being on time. I don't even know what happens if they're late, but it can't be pretty.

@chrisjames: So, we need payday lenders to defend us against big business. Now I have truly heard it all.

Is Ohio's actions bad for consumers? I think not.

@Bladefist: Dude, you have no idea what you're talking about. Interest rates are generally annualized. Nobody takes 30 years of interest and calculates it on an annual basis because it's insane. Clearly, the fact that payday lenders charge 391% interest is driving you nuts, but blame the underlying fact, not the people accurately pointing it out.

@RINO-Marty: 15% over two weeks is 391% APR. 15% on a two-week loan that is paid off on time is 15% interest paid. If you take out $100 and pay it back in two weeks, as you are supposed to, then you pay an extra $15, not $391. The point is not that 391% APR is not 391% APR--it is. The point is that 391% is just a scare tactic to "prove" that you are being cheated.

There's the APR, used to calculate the loan rate, and the interest earned, the aggregate rate of return assuming all payments are made on time. I have a 12% APR loan, but I'm paying 33% interest on it.

@RINO-Marty: Think about that for a bit. Snappy quips don't invalidate what I said.

@Bladefist:

I guess you're the kind of guy who doesn't understand calories per serving either.

@chrisjames: So what you're saying is that there's no difference in terms between a 1-day $100 loan that charges $15 interest and a 1-year $100 loan that charges $15 interest, because they're both $15.

I'm surprised to see you and Bladefist defending Payday lenders here, because you frankly sound like the kinds of unsophisticated, easily manipulated, innumerate people who are ripped off by these places.

@bbagdan: Heh. A bucket of celery and a spoonful of peanut butter have the same number of calories, right?

@Bladefist: I agree with you that the fact that the rate is 391% is used to shock people, but it's not a dishonest number. I think that any time financial numbers are used to enact legislation, a very brief mini-course in finance should be given first.

Perhaps something along the lines of "Interest percentages are presented at an annualized rate. For example, a loan of $100 at a 50% APR would generate an interest payment of $50 at the end of the year. Smaller term loans are also presented at an annualized rate, even though the term might not reach a year. For example, a loan of $100 that is due $15 after two weeks is presented as 391% APR."

Then they could go on to explain how they calculate that rate. After that they could present the relevant facts to the issue, like the percent of people who carry the loans for multiple periods, etc. More information is always better, when it's used to present the case clearly.

@RINO-Marty: Fail.

"Also, the vast majority of payday revenue comes from a small pool of habitual borrowers. Many of these people make stupid decisions, many are very unsophisticated, many are trapped in debt cycles...and surely many are irresponsible. But there are and should be laws that protect unsophisticated, uneducated people from those who desire to rip them off. That's why I'm not a Republican (anymore) and, presumably, why you are."

Exactly. EXACTLY. You think people are too stupid to handle their own finances, so the government should come in and do it for them. Look, maybe some people are, but thats their problem. It's their money. Why should the government pity its citizens? Let the smart ones become rich, and the dumb ones, well, remain dumb. We have free libraries. They're fully allowed to go pick up a book, and read about financial information.

I know what APR is. If one more person explains what APR is, I'm going to go nuts. APR is a good standardization to explain rates. Especially good when the rates are atleast a year. I am just saying, INCLUDE more data, saying that 391$ on 100$ is not typical.

@bbagdan: oh you're hilarious. Do you see a lack of understand on my part? There is not a lack of understanding. Just upset the article only uses the one number and doesn't explain in more detail.

@RINO-Marty: What terms? In the end, I'm paying $15 extra per $100, so that sounds reasonable. I'll have to come up with that extra $15 in one day, or I'll have a year to come up with it. So what? That's inherent in the loan. I pay for the service, and I must accept that responsibility. If you don't think charging $15 per $100 over two weeks, or one day, is reasonable, go somewhere else. So instead, Ohio decided to replace consumer choice and reason with a lawmaker's judgement call.

@Bladefist: Now you're confused about the difference between % and $. The article didn't say $391, it said 391%, which is what it is.

And thank you for so succinctly explaining the Republican Party platform, which is: "I'm out for myself, and f*** everybody else, especially stupid people." Perfect!

If we can't, as a society, protect stoopid people from themselves, I want to see Bags o' Broken Glass on the toy shelves, expired meat on the butcher's rack and an abolition of driving tests on the cars driving on the streets.
I'm chagrinned that there's controversy over using yearly figures for the Annual Periodic Rate. What's next: complaining that MPG standards are unfair because they use gallons? Jeezus, people, pick a better fight.
If large banks are using crooked schemes to rip off consumers, the fix is to pass laws stopping them from doing so, not allowing local sleazebags to do even worse. This isn't Corporatist.

I'm confident that, once the dust has settled, these legalized loan sharks will do fine under reasonable rates. They're whining because that's what they do. Too many of their customers get trapped into 300% rolling loans, teased into them by "only" being charged $15. It's bad for them and their local economies.

@Bladefist: The article says: A typical payday loan charges around $15 per $100 borrowed on a 2 week loan, which works out to an interest rate of 391%.

What part didn't you understand, Blade?

@Trai_Dep: Exactly. What Bladefist wants is to turn the USA into Haiti. Because that's exactly how it is down there. Blade, ever been to Haiti, pal?

@chrisjames: I'm making the assumption most people have exhausted all other options before going to payday loans. This is going to hurt people bad. Most of the time, the payday loans are small amounts of money. I would guess usually under $1000. $15 for 100$ loan is nothing.

No one is arguing what APR is, and I conceded to say its okay to have it in the article, however, its irresponsible to not also include statistical data, saying that 391$ will probably NEVER happen. After a year? On a $100? The pay day loan company would not spend a year going after 100. That is bad business. They'd sell it to a collection agency and that'd be that. The article pin points the absolute negatives, and blatantly ignores any data that could make it sound not that bad.

And for the big business comment, thats absurd. Don't know of any wal-mart sized payday loan companies.

391$ assuming 100$