After months of debate over whether to cap payday-lending interest rates at 36 percent, House Republican leaders tossed a sharp curveball yesterday by proposing a 28 percent cap.
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 bill goes even further than the previous proposal backed by the Ohio Coalition for Responsible Lending. Gov. Ted Strickland last week called for a 36 percent cap.
I think this is going to be one of the biggest mistakes ohio can make!!! Do they understand how many people will be out of jobs??? Those people will collect unemployment- which will cost the tax payers!!!!! Our country is already doing bad, this is going to make it much worse!! Also, aren’t we supposed to be living in a FREE country??? Pretty sure we should be able to make our own finaical choices!! The apr% can not be that low!! I understand there should be more strict rules but people get loans because they need help and can’t get a loan from the bank or anywhere else!! And banks have a $33 overdraft fee!!! SO if you overdraft 1.00 that will be a $33 fee!!! Which it is only $15 to borrow $100 this makes no sense, if we should be closed so should credit card companies, no over draft fees!!! It seems as if our reps are trying to control us!!! We should not be controled its our choice of what we want to do with our money!!
This smells to good to be true. Are the democrats being set up? A 28% cap is lower than what the credit card companies can charge.
I like what I see but am waiting for the the other shoe to drop.
To Trisha – I can’t tell if you work for a check cashing store or use one. If the latter I suggest you conact one of the credit unions in your area. I’ve heard several of them now offer reasonable check cashing services so you don’t have to wait for the new rules to save money.
Put these payday loan people out of business, which this bill would surely do if passed, and you’re screwing a good business and the people that borrow, because these places will go belly-up. I use a credit union and it has nothing to do with getting a “payday” loan. This regulating borders on socialism and it’s sickening.
“This regulating borders on socialism and it’s sickening.”
Really? Sure, let’s not have any protections for those less fortunate who are preyed upon by these bloodsuckers, who really seem to be loan sharks in disguise.
In another realm, these folks would break your legs if you didn’t pay up. In this realm, they just charge you 5 billion percent interest if you’re twenty minutes late with the money.
Following the previous posters line of thinking let’s not have any regulation on business. Let the almighty greed to make a buck rule everything.
Let’s let business dump whatever they want into the ground and water so the rest of us can get sick. Let’s let insurance companies collect whatever they want in premiums and then balk when someone files a legitimate claim. Let’s let companies rape and pillage the natural resources to make a product so that the environment is so messed up that our children and grandchildren suffer the consequences. Let’s let developers build acres and acres of homes but balk at doing all of the things that are necessary like help build roads and schools for all the new residents of what used to be a cornfield.
After all, it’s protecting jobs right? Sounds like sound public policy to me. The rich get richer and the rest of us pick up the tab — in more ways than one.
Give me an effiing break.
ok well I work for a payday loan company and yea it is going to suck if we lose our jobs but thats not the main issue! What are the people who use our services going to do? You say that we are hurting the people and taking their money but honestly we are the ones keeping them afloat! Not everybody has good credit to borrow money from a bank, or has rich family members to borrow money from so what happens to them if you shut us down? Honestly what other options do they have? NONE!!! If you shut us down you are only hurting the economy more, you will be putting over 6000 people out of jobs and the money that we lend to customers they use to put back into the economy for instince groceries, gas, bills. So what happens when we are all gone? I thought the government was suppose to help the american people not hurt us!
Kelly – Thank you for being honest about your employer. I have a friend that opened an independent check cashing store. I can understand your (and his) personal concern about the proposed legislation. One of the things he quickly discovered is that most of his business comes from repeat/regular customers. Is this your experience? I would think that these folks that are living on the edge could make better use of that $15 a week which adds up to one week’s pay over the course of a year. I agree with you, that for the occaisional emergency there should be a way to borrow money. But by occaissional I mean less than four times a year. If it is more frequent then something in that person’s life needs to change because they are apparently living beyond their means. And that is a whole other topic. If this legislation passes and it causes you to lose your job I hope you are able to find new employment quickly. Based on your writing skills you sound pretty smart and I’m sure you will land on your feet.
I’ve borrowed from the check cashing places a lot of times in the past when I was in a crunch and had nowhere else to go. Usually 6-8 times a year. It came in especially handy when I had car problems. I knew the cost was high but it was always worth it. This new legislation will be a total detriment to folks who actually need it.
“I would think that these folks that are living on the edge could make better use of that $15 a week which adds up to one week’s pay over the course of a year.” “I would think that these folks that are living on the edge could make better use of that $15 a week which adds up to one week’s pay over the course of a year.”
Wow, now you want to control the way people use their money? You must be one of the anti-smoking zealots, who are convinced banning smoking in private businesses is going to make people stop smoking. Typical liberal nanny-statism.
Brian, If I buy your argument then we should also consider dropping regulations on credit cards, home loans and other types of borrowing. This would allow an open and free marketplace for the money lenders to control all of our lives. And then I can watch as the value of my home and my neighbors homes continue to drop as they have already with the greedy lending practices that have caused so many foreclosures. I know you will say it is the borrowers fault.
I’m not asking you to buy my argument. Payday loans are a completely separate animal from credit cards and home loans, and also they’ve been set at $15 per $100 for over 10 years. Your argument is like comparing apples to oranges.
“In another realm, these folks would break your legs if you didn’t pay up. In this realm, they just charge you 5 billion percent interest if you’re twenty minutes late with the money.”
Tristan-
No, they give you a break if you can’t pay it back when it’s due. As for the rest of the argument you made, I didn’t say any of those things.
$15 cost for $100 would be 15% if the loan were for a year. But when it’s for two weeks it becomes 390% per year. And the lender keeps recycling the loan, mostly to repeat customers who can’t borrow their way out of trouble. The average customer gets over 24 loans per year. Look at http://www.cohhio.org/pdf/919TrappedByDesignfinal.pdf particularly tables one and two. So the lender keeps those high rates out there all year.
Sure people work in payday loan places, but they could work making affordable loans to people. Don’t forget that everyone who goes to a payday lender has to write a check, which means they have an account in a bank, credit union etc. which may be providing lines of credit to payday lenders. Anyway we don’t generally pay people to do harm, even if it would create jobs.
Bank fees are a problem also. They make something like half their profits off penalties and fees rather than interest, where they should be making it. This encourages what Prof. Elizabeth Warren calls the “tricks and traps” business model. They put a lot of energy into getting epopel to be penalized. Penalties should be revenue neutral rather than profitable. A recent gimmick is to make “overdraft protection” at payday loan rates. This particularly traps college students who aren’t told that they don’t have enough in their accounts and are instead given high interst overdraft loan. Many people have stories about being tken advantage of by banks. However the legal system allows them to choose the laws of bank friendly states like Delaware and then use those laws everywhere, essentially “exporting” those laws to other states.
People are encouraged to finance the consumer economy with debt. Debt has replaced living wages and a social safety net. With computers and weakened bankruptcy laws, debt can hang over people forever, growing larger and larger. Then many people blame people for spending instead of saving. Essentially we all live off of selling people things they don’t need and for many can’t afford.
Anyway debt is like an iceberg with payday loans on the bottom, mortgages on the top and credit cards and the like in the middle. The whole system is in need of serious reform. Payday loans are a good start.
Tristan-
If you are going to speak out against payday lending you really should get your facts straight. Payday lenders do not prey upon less fortunate people. Payday lenders are required by law to loan to these customers as long as they have some type of reasonable income. If payday lenders opted to stop lending to those people they would either 1. get sued for discrimination or 2. be forced to start checking customer’s credit, thus defeating the purpose of payday loan. Also, if you had any clue about payday lending you would know that even though the ridiculous legislators require them to show what their APR’s would be if they were charging them, the payday lenders are only charging a set fee. For example, certain companies in OH if you borrow $800 you pay back $908.75. Can this go up? Yes, at most $25.00 for an NSF fee. Therefore, if you borrow $800 the most you could ever have to pay back is $933.75. Put $800 on your credit card and refuse to pay it back, let me know how much they end up charging you. It is people like you who talk about payday lending, but are ignorant about how it really works, that give payday lending a bad reputation. Go sit by your pool and drink a mimosa.
The purpose of a paday loan is to be a short term financial fix to those who can’t get credit from other companies. Just like with credit cards and the housing market, payday lenders can’t police whether people are using them responsibly or not.
If your credit is horrible and your car breaks down, where would you get the money to fix it so that you can go to work and get to the grocery store to feed your children? Maybe you should just not buy food and let your kids go hungry. But I am sure you have never had to sit around and make that kind of decision. Let your government keep regulating you and see where you end up.
I overdrew my bank account by $10 dollars last week to get gas and the bank charged me $35. I guess that is okay because they are not a payday lender. When the bank pulled that crap a payday loan for $15 per hundred that I borrow sounded great. People are not required to use payday lenders, I have to use a bank to pay my bills.
Karli or whoever you are – Tristan made some good points and maybe you are also right that we should also be directing some of the legislative effort towards the NSF and late fee payments you describe. The banks make the argument that they have high fees to deter people from being late or bouncing checks. It would only be fair to legislate a requiremnet for them to offer an alternative when their customer is in a bind with a small loan at a reasonable rate.
The governor and the republican party should be ashmed of themselves.
go to http://citizensforresponsiblegovernmentinohio.org for details and what you can do to stop this.
From Mr. Utterbach’s website.
“On April 30, 2008 Citizens for Responsible Government in Ohio was formed. It all started when Hugh S. Utterback, our Executive Director, realized that State legislators passed a bill to put him out of business after he had operated ethically for four years and licensed by the state to do payday loans. When Mr. Utterback started to contact the legislators and became politically active, he soon learned that many of those voting to put him out of business were doing so not on the merits of the legislation but purely, in many cases, for political or personal self gain and party politics. This led him to form the organization to guard against these kinds of abuses.”
If he called his groups “Payday lenders and friends to preserve payday lending” then we could talk about whether payday lending should continue as it exists now. Instead he calls himself “Citizens for Responsible Government.” Is anyone against responsible government? No wonder people get disgusted with how politics works.
Mr. Hertle,
Democrats and Republicans have jocked to win a feather in their cap by finding a scapegoat (the payday loan Industry) that was an easy target. All I know is that legislators need to be voting on the merits of any issue and never for their self-interest. It’s sad to see both parties willing to hurt so many families and the Ohio economy just to preserve their jobs and their parties in an election year. That’s why I started Citizens for Responsible Government in Ohio. After payday lending they’ll be many more issues to tackle. But for now payday lending is on the top of the agenda.
THIS IS ABOUT FREEDOM OF CHOICE, AND UNLESS YOU ARE LOSEING YOUR JOB OR BEING AFFECTED, YOU ARE NOT LOOKING AT IT LIKE THAT. AND THAT IS SAD THAT IN THIS DAY AND AGE WITH TIMES BEING SO HARD WE JUST LAY DOWN AND WATCH OUR FREEDOM BE PULLED FROM UNDER US LITTLE BY LITTLE
Well I live in Ohio and have been caught up in the scam for years. It was a medical emergency that started it and then the loan places kept offering more and more and with my bad judgement I now owe thousands a month. If they go away I will be in deep trouble. I barrow to pay them back each month. Now the loan place I go to would not loan again because of this new bill. I will have to default the other places and wait to see what happens..