Payday loan industry seeks to repeal Ohio law
by Steve Cypher on Wednesday, August 27th, 2008In a move that wasn’t entirely unforeseen, representatives of the payday loan industry in Ohio are attempting to place a referendum on the ballot that would remove the interest rate cap of 28 percent and allow an annual rate of 391 percent.
Payday Loans
You’ll remember that here at Auto Credit Express, we’ve discussed payday lending before. These are the small storefront lenders that specialize in lending small amounts of money (usually between $100 and $500) for short periods of time (2 week intervals) at a cost of $15 per $100. While this may seem like a small fee, it amounts to an annual percentage rate of 391percent.
Payday lenders point out that most of these loans are paid off at the end of the 2 week period. Opponents of this practice point out that the majority of borrowers are comprised of lower-income individuals and that many of them are trapped in a cycle of “rolling over” the loan and end up paying many times the principle in interest charges over the course of the months it usually takes them to pay off the loan.
Ohio’s Law
Back in July, Ohio Governor Ted Strickland, a Democrat, signed into law a payday lending bill that had passed the Ohio Legislature with a great deal of non-partisan support. The heart of House Bill 545 was a section that capped the annual interest rate of this type of loan at 28 percent and limits the number of loans a borrower can take out in a year.
Industry Response
According to lending industry spokesperson Kim Norris, “”Consumers know what they’re doing. They come in, they take out a $100 loan, and they pay $15 on that loan. It’s a short-term loan, and they pay it back in two weeks. That’s what 90 percent of customers do.”
The Ohio Chamber of Commerce president and CEO Andrew E. Doehrel was equally supportive of the repeal, stating ““The Ohio Chamber champions free enterprise and economic competitiveness and we believe HB 545…runs counter to our mission. This new law, if not reined in by Ohio voters, will drive an entire industry and 6,000 good-paying jobs out of our state.”
What supporters of the law have to say
Ohio House Speaker Jon Husted, a Republican from Kettering, Ohio, had this to say about the new law: ” We did not ban small consumer loans. Rather we capped the interest rate at a level that created a reasonable expectation that the borrower could pay it back. They wouldn’t be trapped in a cycle of debt. We didn’t ban small loans. We banned a defective product.”
What do you think about payday lending?
Here at Auto Credit Express, we feel that an annual interest rate of 391 percent is onerous in the extreme. We also feel that an interest rate cap would allow borrowers to pay off their debts more easily and more quickly, while still giving lenders the ability to make a profit. What do you think?
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You have got to be kidding…what you and most do not understand is that if in Ohio the annual interest rate is capped to 28%…the payday lending business is gone. They can not afford to loan to a customer for 1.28 for every $100 loan they lend. Banks charge about 30 dollars for a bounced check….and another $10 plus every day the account was negative…but somehow they get away with that! So say you are going to bounce a check for $75…if you bounce that check you will get charged $30 plus for an overdraft plus whatever your bank charges for negative account until you get paid again. Or you can come get a loan for $100 and pay $115 when you get paid..which one makes more sense to you??? The bottom line is that this law will put the payday lenders out of business and will give no options for short term finacial needs. The government has NO business telling people that they do not have thte right to a short term loan!!!
Get over it, Ashley. Most of the people who take out payday loans don’t have a checking account - so that argument of yours goes out the window. The government is not telling people they don’t have the right to a short term loan, they are only telling the payday loan industry that an annual interest rate of 391% is not acceptable.
[...] two previous articles, those of us here at Auto Credit Express have discussed payday loans and the payday loan industry. These are loans made by national companies out of small storefront [...]