An Ohio law intended to cap interest rates on payday loans at 28 percent has been thwarted by lenders who have found ways to charge up to 680 percent interest, according to lawmakers who are preparing a second round of legislation.
The law, the Short-Term Loan Act, was enacted last spring and upheld in a statewide referendum in November. It decreased the maximum annual interest rate to 28 percent, from the previous 391 percent. Loans typically had terms of two weeks and were secured by a postdated check and proof of employment.
For a report on some studies of this industry by unbiased and unaffiliated scholars, check out an op-ed piece in this past monday’s Monday’s Wall St. Journal. Among other things, the study cited by the author, as well as other unbiased studies, found that when this credit option is removed, credit card late fees (which, when expressed in terms of an APR, is higher than many payday lender fees), utility late charges and reconnect fees, consumer bankruptcies and other adverse consequences all go up. The article also debunks criticism of the industry that paints borrowers from payday lenders as ignorant and uninformed. That generally is not the case, and, since these lenders are subject to truth in lending and other similar laws, the costs of the borrowing are fully disclosed to the borrowers when they take out a loan. It should be noted that the short term of these loans skews the APR; none of these loans have terms of more than 2 or 3 weeks, and many are shorter.
People peddling pay day loans should be out of business and unemployed. These loans don’t help anyone. The lobbyists pumping our polititions to support this business should also find themselves unemployed. Usurious lending should not be allowed.
Searchers, I respectfully disagree. I would refer you to the WSJ article I talked about, and would caution against taking the advice of the industry critics unskeptically; if you do some digging, you’ll find that the Center for Responsible Lending, for example, is funded by a credit union that is seeking to compete with this industry. You can also find a study by staffers at the NY Federal Reserve Bank that reach similar conclusions to those cited in the WSJ Article. If you choose not to use payday loans, that’s fine. Many people do, and they are neither uninformed nor gullible.
Wow. It’s amazing what the power of greed can do. Thanks to Senator Bob Corker, payday lenders like W. Allan Jones and Check into Cash continue to get away with this usurious behavior. Where is the help for the little guy?
Check out my links for even more disturbing information about the payday lending industry.