Category: Ohio

Though provoking piece on NPR about payday lending in Ohio.  You can hear the entire podcast at NPR.  The article is speaking out against the state government’s intervention and rate caps.

Good excerpt:

“Everything else equal, suppliers of goods would rather collude with each other to set a high price,” DeYoung says. The cap basically does that for them, DeYoung says. “The government has handed them a tool for colluding.”

There is a hearing scheduled this week for the remaining 835 lenders. Since the state capped interest rates at 28%, lenders began to operate under an alternative law.

Since this law, almost 50% of lenders in Ohio have stopped giving loans.

You can read more in the Dayton Daily News.

These comments come from the Canton Rep.

“The only difference I see between Pay Day lenders and loan sharking is the latter is illegal and the former should be. If you can’t make a decent profit off of a 28% rate of interest you’re obviously in the wrong business.” Retired Banker

________

“Retired Banker: I’m surprised with your ‘banking education’ you dont realize what a 28% APR is on a 2 week loan. There is no decent profit. 28% APR on a two week loan is $1.07. It costs more to print the contract. Payday Lenders have overhead like any other business. These are high risk loans, loans that banks won’t give. These loans are needed by consumers with less than fair credit for emergencies. I work for a lender, and am proud of the business. I know the behind the scenes workings of the company and feel the media/blogs have made a poor representation of what a payday loan was. The payday loans charged 15% of the loan as a fee. Thats IT, but when you take that figure and multiply it to appear as a ANNUAL rate, it looks ridiculous, just like 28% APR divided down to a 2 week loan is ridiculous to believe any business could survive.” taramapes

I’m a little surpised at Retired Banker. Maybe he’s just a Monopoly Banker and not a real one.

Ohio has been a pretty hairy situation. An article in Cleveland.com titled “Democrats seem in no rush to fix Ohio lender loophole.” by Thomas Suddes. Among other things, he had this to say:

“Lenders say they told legislators in 2008, and legislators understood, that lenders would indeed substitute mortgage and small-loan borrowing for the banned loans. (But lenders also claimed Widener’s bill would run them out of Ohio altogether.) Then there’s a “fairness” argument: Payday lenders argue the General Assembly won’t clamp down on banks’ bounced-check and cash-advance fees. (One reason for that: For most purposes, Congress monopolizes banking law.) Also on the table: The “use” or “market” argument: If no Ohioan ever needed a payday loan, the lenders would vanish. That is, unless Ohio assures poor Ohioans more credit options, Ohio should let lenders be. “

The Ohio lenders are definitely making their case.

This was taken from a radio interview in Ohio. Here are the parties involved:

Ted Sauders is the CEO at Checksmart.
Lundy is the Ohio Rep that’s sponsors the new bill that will put lenders out of business.
Rick Jackson is the interviewer.

Jackson: What happens to you and your company if 209 passes?

Saunders: We leave the state

Jackson: That cut and dried? We leave the state?

Saunders: We’ll pull out all of our stores, and I’ll have to let go all
those people, and I’ll find
something different to do with my life.

Checksmart operates over 90 stores in Ohio. Representative Lundy
says the legislation is not meant to destroy the industry, but to make lenders
comply with the mandate previously set by Ohio voters.

Lundy: We’re just simply trying to enforce issue 5, the 28% cap, and I
would suggest that the industry change its business model to make things work
because that’s where Ohioans want to be.

Check out the full article here.

Ok. I get it. Ohio voters voted to stop payday lending. Is this fair to the 20% (I’m pulling this number out of the air) of the population that use the payday product? Absolutely not.

Voters unloaded on the industry b/c of the bad PR payday lending gets.

Read this editorial, if you want to be annoyed. They don’t even have the cahonees to put a name next to it. The writer is “the editors”.

Lundy’s bill is missing a Republican co-sponsor in a largely Republican Senate. Its a very ticky-tack law, so any legislator with common sense would stay away.

Here are some of the low-lights:

• Make it harder for payday lenders to evade the law through alternative licensing by capping loans of $1,000 or less at the state’s 28 percent usury rate, regardless of which lending statute the loans are made under.
• Require most lenders to give consumers at least three months to pay back loans of $1,000 or less.
• Forbid lenders to evade the 28 percent interest cap by imposing phony fees. After the new law went into effect, payday lenders began charging credit investigation fees, even though they historically haven’t run credit checks on customers. Similarly, the bill would bar lenders from issuing loans to customers in the form of checks or money orders that they then charge customers to cash.
• Require payday lenders to follow some of the federal fair debt collection rules in place for third-party debt collectors. Under Lundy’s bill, lenders who use their own employees to collect past-due loans would not, for example, be able to harass, threaten or intimidate consumers who fall behind on repayment.
• Impose fines for violations of the law.

You can read more about Ohio here.

Legislators are not happy with short-term lenders in Ohio. Today, lenders in Ohio charge a small fee on a loan and then, many, will cash the check for a fee. Some lenders cash it as a convenience.

The essense of the bill is to stop short term lenders from getting licenses under other statutes that are construed as pro-lender.

I, personally, get a kick out of the Representative’s “holier than thou” quote:

“I want them to know when this thing comes out of the gate that this means business,”

You can read the full article titled “Rep. Matt Lundy introduces bill to combat payday loan clones.“

It’s unfortunate that in Ohio, you can’t call a cash advance a payday loan anymore. Sure it’s just a name, but it perpetuates the reputation of a payday loan as something bad.

This article, at Cincinnatti.com is titled “Payday Lenders Drying Up“, is 4 pages long; but does a nice job showing both sides of the debate. For once, they got some actual cash advance customers on the record. I think it’s worth sharing:

“Are you going to loan me $200 for two weeks for $30? I don’t think so,”
said Linda Coleman, a 28-year-old machine operator and nursing student from
Colerain Township. She was borrowing money to cover her quarterly water bill,
acknowledging she uses short-term loans about once a month.”

“My personal belief is I don’t think it should be regulated – you should
personally educate yourself.” Says Mike Montgomery. He actually avoids
short-term loans because he and his wife know people who’ve “gotten pretty far
behind” using them. Still, he was sure they “help some people.”

“Johney Easterling, a 47-year-old maintenance worker at a social-service
agency who lives in Deer Park, said he borrows money about five times a year. He
doesn’t see any problem with the fees as long as he doesn’t borrow too
much.”