Not every state is giving payday lenders a hard time. Kentucky granted a moratorium to payday lenders on house bill 444.
Every state has its own unique way of dealing with issues. The legislators in Kentucky probably feel that people choose to use the product. They do not need eliminate it.
The more I think about it, it makes more sense. If you don’t like the product, don’t use it and tell your friends not to use it. Stop the economic morality card.
The Columbus Dispatch writes that there are over 1000 payday lenders operating in the state of Ohio.
The article is incorrect in it’s assessment that interest over 28% is being charged on these loans. The APRs are over 28%. Regardless, some consumer advocacy groups are asking the state to change the small loan and mortgage acts to include a 90 day minimum term.
Don’t think that they’re trying to get rid of cash advances. Banks are offering payday loans at APRs above 28% as reported by PDL Industry back in November.
It would be nice if they mentioned this in the article.
There is no doubt that there are lots of Internet payday loans being processed everyday. State governments are starting to notice. They want Internet lenders to follow the same rules as brick and mortar lenders in their state. Most states have already adopted this stance, but it’s worth mentioning when it’s in the news.
The most recent state to bring this up is Idaho. A Senate committee has agreed to consider a bill that would require licenses for online payday lenders.
Attorney General, Richard Cordray, speaks up in Ohio. It seems they have an issue with the new business practices of the former payday loan companies.
The big issue, at the center of all this, is that lenders are cashing checks from the proceeds of a loan for up to 10% of the face value and in some cases pressuring the borrower to do so.
The lender is put in a difficult predicament. If he does not cash the check, can he stay in business making $15-$45 per loan? The loan losses could be too much.
I spoke with an Ohio Lender and he’s annoyed with other lenders charging 8-10% to cash their own check. He makes an excellent point about convenience. He thinks the borrower should pay for the convenience of not having to wait for the check to clear in his/her account. He thinks lenders should be able to charge atleast what they charge for a government check, which is around 3%.
Recently, I’ve learned that the government is getting involved more deeply in financial regulation. Now, I’m all for leveling the playing field.
My issue is this, as it pertains to payday loans. They want to install “common sense” rules.
CRL president Michael Calhoun says that “A 36 percent cap on annual interest for consumer credit is a quick, common-sense way to restore protections that have been severely compromised in the consumer credit market. It would cost taxpayers nothing and plug a $5 billion hole in the wallets of working families.”
If this stuff is common sense, then why do we need a rule for it? I guess what he’s saying is that all the people that use payday loans do NOT have any common sense?
I think this is a clear example of economic paternalism.
Payday lending has become big. Now, it’s just a matter of taking sides to see who wins. for the middle 80%, these sides are dictated by the press.
I came across an interesting post by Fitsnews.com. It centered around an op-ed done by former senator George McGovern. It’s worth reading his biography on Wikipedia, here.
He takes on mortagages, healthcare and payday loans. What’s interesting about this post is that Senator McGovern’s stance on big government, especially since he is a Democrat and won the presidential nomination in 1972.
His main point is this “Freedom means responsibility.” He also goes on to say, “The nature of freedom of choice is that some people will misuse their responsibility and hurt themselves in the process. We should do our best to educate them, but without diminishing choice for everyone else.”
The House of Representatives are putting together a bill that would effectively cap interest rates at 36%. The AP News reports that several shares of publicly held payday and pawn lenders stock price took a hit for a second straight day. Anecdotally, most of the stock market has been taking a hit, so this news could be completely incidental.
The truth be told, even if this bill never sees the light of day, the impact this will have on public opinion will be felt.
I would love to get a clarification on this point. You can still charge 36% interest and product a triple digit APR, if you’re able to charge fees on top of the loan. Payday lenders have claimed from the beginning that their fees are not interest.
Don’t navigate away. This is still the PDL Industry Blog.
I figured out that people like reading from left to right and not center to right. No one really liked the orange either. Anyway, thanks for reading.
If you’re a payday lender in Montana, you’re safe. This article titled Bills to limit payday loan interest rates likely dead reports that a bill did not make it out of the house or senate this legislative period. The writer of this article thinks that it will be another 2 years before any change in the legislation could take place.
The senate floor came close to debating the bill on the floor. They needed 26 votes, but came up one vote short.
Internet payday lenders received a setback recently. The FTC and the state are seeking to permanently bar 7 US companies (and 4 other British companies were named in the order) from “future violations”, whatever that means; and return any money made while allegedly using illegal collection tactics. Sound pretty vague, if you ask me.
Last November, I published a post title Nevada trying to cut down on Internet payday loans. Apparently, the commissioner of the Department of Regulation in Nevada did not want to deal with out of state claims, made about Internet lenders operating in Nevada. It looks like someone paid attention.
Among other things, the internet lenders are being accused of:
“Violating the law by using unfair and deceptive collection tactics, including falsely threatening consumers with arrest or imprisonment, falsely claiming that consumers are legally obligated to pay the debts, threatening to take legal action they cannot take, repeatedly calling consumers at work and using abusive and profane language; and disclosing consumers’ purported debts to co-workers, employers and other third parties. They also allegedly violated the U.S. Truth in Lending Act and federal Regulation Z by failing to make required written disclosures about key terms including the amount financed, itemization of the amount financed, the finance charge, the annual percentage rate, the payment schedule, the total number of payments and any late payment fees.”
Personally, I’m a little surprised that this has reached the federal level. It seems that Internet Lenders based in the US are being targeted by the state and federal authorities. Just last we, a lender settled with the state of Wisconsin in a post titled Internet Lender hit with $60k class action suit.
Attorney’s for the 7 lenders are working to resolve the complaint. They plan on filing a response to the complaint by March 1st.
One thing for sure is that they’re not stopping just at the lenders. They’ve got their sights on the lead generators also.