This Just In: Payday Pundit Fired Up Over Ohio… Again
May 30, 2008 | industry critics | Comments (1)
Looking over the month’s media coverage of payday lending the Pundit came across this article from Ohio and was incensed afresh by the sheer stupidity of the content.
Springfield, Ohio — As payday lending stores promise to close, alternative loan products can aid consumers.
What a wonderful thing to finally consider.Cash America, which runs Cashland and Cash America Payday Advance, announced it will close nearly all of its Ohio stores in response to state legislation regulating interest rates and other practices.
It’s not known yet whether that will include the Springfield stores, a company spokeswoman said.
Several other companies testified during hearings that the legislation would cause them to shut their doors.
The pending legislation includes creating a program to offer incentives for nonprofits and banks to make small loans, said Tom Allio, chairman of the Ohio Coalition for Responsible Lending.
Competition in the short term market is more than welcome – but why do these banks and non-profits need an incentive? Doesn’t this just cost the taxpayer? Isn’t it tidy that a coalition that featured banks and credit unions advocated and achieved legislation that gave THEM “incentives” to offer payday loans? Why haven’t these groups – who advocated that payday loans be regulated out of existence – entered the market before? If they can offer something better… why don’t they?
Consumers also can turn to credit unions, he said.
I wonder what credit unions offer…
“That’s a much more affordable product,” Allio said.
R-E-A-L-L-Y…
International Harvester Credit Union offers a payday alternative loan with an 18 percent annual percentage rate and a $35 annual fee for $250, or $70 for $500.
So, that translates to a fee of roughly $15 per $100 if you are looking for a payday loan. I wonder what the average fee is for a payday loan.. oh wait $15 per $100 loaned.
The credit union began offering the loans about four months ago and has 50 to 60 outstanding, President and CEO Jim Kitchen said.
That seems odd. Considering that hundreds of thousands of Ohioans have use payday loans, I wonder why the low number.
“Our members were getting strapped by going to too many payday lenders,” he said.
Wright-Patt Credit Union offers a similar product.
Both have requirements, such as membership for 60 days and a verifiable income.
So, not only are the fees the same… but there are actually even more difficulties to getting these loans? Is there a fee for membership? What happens to the people of Ohio who aren’t a member of these credit unions? And does this raise questions about the intent of this legislation? It seems that credit unions have a lot to gain.
Wright-Patt has offered its stretch pay loans for about seven years and has expanded it to 40 credit unions in five states, said Jeff Carpenter, vice president of membership and development.
About 8,600 loans totaling $2.4 million are outstanding.
The loans require repayment before another one can be taken, Carpenter said.
“It’s not going to get you stuck in it,” he said.
This goes back to the cycle of debt argument that critics use. That argument is simply not valid. Under CFSA’s Best Practices, any customer who cannot payback their loan when due has the option of entering into an extended payment plan, allowing them to repay the loan over a period of additional weeks. This option is provided to customers for any reason and at no additional cost. In most of the 37 states that regulate payday lending, rollovers or loan extensions are either limited or prohibited. In states without limits, CFSA members limit the number of rollovers to four. It is not possible for someone to rollover an advance for an entire year or to accrue the kinds of fees claimed by payday lending critics. Finally, research shows that many people who bounce checks and use overdraft protection often do so at a higher frequency and at a higher cost.
Update: And this story from the Tribune Chronicle on the fallout from this terrible legislation explains why I am seeing flames.
Update 2: In a similar vein, the author of this piece clearly has his heart in the right place but isn’t doing the right math when it comes to comparing payday loans to their alternatives. How does one not include credit union membership fees and other stipulations like forced savings accounts etc when trying to compare these alternatives with payday loans?
Comments»
With an excelent response like that above, its difficult to do anything other than wholeheartedly agree. And I do indeed.
I find it all to common that these do-gooder agencies and companies deliberatey, willfully and knowingly distort and misrepresent the PDL industry for their own purpose and financial gain. The public should only look at CFSA’s web site for the truth. Maybe Gov Strickland or one of his staff should have done dilligence prior to signing a law. Worse yet, they probably did. Keep up with the great commentary. Email me, I’m an ally.