In his latest rant against the payday lending industry in Ohio, Thomas Suddes argues payday lenders are operating through a loophole. The fact is, while dozens of lenders closed their doors upon passage of the annual rate cap in Ohio, other lenders, instead of laying off employees and turning customers away, began offering different credit products and services- all well within the Ohio lending laws.

In fact, during the legislative debate concerning payday lending, lenders were urged to apply for licenses to operate under Ohio’s Small Loan or Mortgage Loan Act and encouraged to come up with new credit products to service the growing consumer demand for short-term, small-dollar loans. This is exactly what lenders are doing- operating under the Small Loan or the Mortgage Loan Act, both which have been part of Ohio law for thirty years.

From a LTE in today’s paper:

The Plain Dealer’s editorial on short-term lending in the state misrepresented the facts (“Payday lenders keep right on fleecing Ohioans,” March 16). Currently, short-term lenders in Ohio are operating under the Small Loan Act, just as legislators requested last year. This law allows borrowers to receive loans of $500 or more at 28 percent APR with a one-time fee that can’t be rolled over or compounded.

Major banks such as Wells Fargo and Fifth Third have been offering loans under these same rules for years. Incredibly, interest groups are attacking only those organizations that previously offered payday loans. The group behind these attacks, the Center for Responsible Lending, is not responsible at all. This lobbying organization is funded by Herb and Marion Sandler, billionaire financiers who made their fortune offering the worst kinds of subprime, adjustable-rate mortgages.

During these tough economic times, credit is already hard enough to come by in Ohio. Further restriction of short-term loans would do nothing to reduce the financial need of individuals, and would only leave them struggling with another challenge to overcome.

The payday lending industry responds to recent media coverage in Ohio. Statement from CFSA:

Due to a prohibitive annual rate cap, payday loans are no longer available in Ohio, yet consumer demand for short-term, small-dollar loans remains.  While dozens of lenders closed their doors upon passage of the annual rate cap, other lenders, instead of laying off employees and turning customers away,  began offering different credit products and services- all well within the Ohio lending laws.

In fact, during the legislative debate concerning payday lending last May, lenders were urged to apply for licenses to operate under Ohio’s Small Loan or Mortgage Loan Act and encouraged to come up with new credit products to service the growing consumer demand for short-term, small-dollar loans.  This is exactly what lenders are doing- operating under the Small Loan or the Mortgage Loan Act, both which have been part of Ohio law for thirty years.

The data published in the report by the Housing Research and Advocacy Center on credit products being offered in Ohio is based on hypotheticals. They looked at what $100 could cost under Ohio’s various loan acts, not what lenders are actually charging and what consumers are actually paying. They also look only at the number of licenses, not the number of actual stores, creating a misleading picture, as some lenders have multiple licenses and others have licenses that they do not use. Additionally, with the average loan in Ohio being $385, the examples cited in the report are deliberately disingenuous.

The bottom line is that there remains a strong consumer demand for short-term credit. A small loan is sometimes the only option for a consumer. At other times, it is the cheapest one – particularly compared to the high costs of bank and credit card fees. While banks and credit unions are already being encouraged to offer short-term loans, in the current economic environment there is an extreme reluctance to make uncollateralized, small-dollar loans. 

A few states have passed legislation capping the annual interest rates on payday loans so low that lenders are forced to close their stores and consumers are left with fewer credit options. While critics argue that payday loans can be offered under these annual rate caps, they also admit that these low APRs ban the product. In fact, Uriah King, with the Center for Responsible Lending (CRL), has acknowledged lenders often close their doors when a 36% annual rate cap is adopted and admits that, “driving the practice of payday lending out of the state—not simply reigning in interest rates” is CRL’s goal .

The real-world examples are proof of the consequences of overly restrictive annual rate caps. Hundreds of stores have closed, thousands of employees have lost their jobs and hundreds of thousands of consumers are left to choose among less desirable credit options.

Read more about annual rate caps in Oregon, Ohio, New Hampshire and D.C.

From the AP story:

Jason Arnold, an RBC Capital Markets research analyst, said the recent aggressive stances taken by Ohio and other states against payday lending have made it tougher for the industry.

“I’m not even sure the companies themselves know how successful these alternative programs will be,” said Arnold. “If it’s profitable to operate under these other pieces of legislation, they will do it. If not, I imagine a lot of them – especially the smaller operations – will just close up shop.”

Michael Evans, 61, of Cincinnati, hopes that won’t happen. Evans, who voted against the rate cap, said payday loans have helped him through some tough times.

“These loans have let me keep some money in my pocket between paychecks when I’m running low,” Evans said. “I would be hurting if they close.”

From a letter to editor in today’s Cleveland Plain Dealer

Bank fees will have you longing for a payday loan

Posted by Raphael W. Hardman/Cleveland November 20, 2008 11:31AM

From an AP story…Too bad policymakers in Ohio didn’t listen to the folks who use payday loans…

Michael Evans, 61, of Cincinnati, hopes the lenders won’t pack up and leave.

Evans, who voted against the rate cap, said payday loans have helped him through some tough times.

“These loans have let me keep some money in my pocket between paychecks when I’m running low,” said Evans. “I would be hurting if they close.”

First reports of store closings reported on WLWT:

As promised, at least one payday lender is closing stores in Ohio after voters failed to repeal a measure cutting the interest the lenders can charge.

Cash America International, Inc., said Wednesday that it would close 43 Cashland locations, laying off about 150 people.

 

“We respect the democratic process and thank the voters who came out to the polls to support the cash advance product,” said company president Daniel R. Feehan in a news release. “This was a hard-fought loss for the industry, but more importantly it will hurt consumers who have nowhere else to turn for short-term credit.

 

Issue 6 attempted to repeal House Bill 545, which calls for an annual rate cap of 28 percent instead of the 391 percent previously allowed. The new law reduces the fee charged on a $100 two-week loan to $1.08 from $15.

 

“There is no way to sustain a viable storefront business by offering small, short-term unsecured consumer credit at this rate,” Feehan said.

 

About 6,000 people are employed by payday lenders in Ohio.

Vote No On Issue 5

Endorsed by Call & Post, Ohio’s Largest African American Newspaper

Faith-Based Community Leaders from Across Country

 

 

 

 

 

 

 

Columbus― Vote No on Issue 5 today wins important endorsements of Ohio’s largest African American newspaper, the Call and Post, along with Bishop Harry Jackson, chairman of the High Impact Leadership Coalition (HILC) – a coalition of black and white faith-based community leaders from across the country.

The Call and Post says, “The bill does nothing to help Ohioans, especially Black Ohioans. This paper takes umbrage to the fact that lawmakers want to decide how families should handle their personal finances. We find this paternalistic at best – and an insult to intelligence at worst. VOTE NO on State Issue 5 on election day, Nov. 4. Individuals and families ought to have the right to determine what is best for them financially.  We don’t need “overseers” overseeing our pocketbooks. Vote NO on State Issue 5.”

 

Bishop Harry Jackson, chairman of the High Impact Leadership Coalition added, “Every job matters in Ohio, and especially now as so many Ohioans struggle to support their families during our country’s most troubling of economic times.”  An estimated 10,000 jobs could be lost (6,000 directly from the industry and 4,000 indirectly) with a total $500 million impact on the State.

 

Vote No on Issue 5 to keep hard-working Ohioans’ name and personal financial information OUT of a government database for tracking purposes, or where the personal information could be breached.    

 

What does a Vote No on Issue 5 mean?

Vote No on Issue 5 means:
·         Consumers can keep their financial lending options.

·         Consumers can keep their private financial decisions, private.

·         Consumers will not be forced into a financial literacy class after two short-term loans within 90 days.

·         Consumers will not be forced into less desirable lending options like bounced checks and credit card late fess – at higher fees than a payday loan.

·         Keeping 10,000 Ohioans employed in good-paying jobs with benefits.

 

Respected columnist Phillip Morris got it right when he said, Plain Dealer columnist Morris: Payday lenders offer needed service “The nation is busy bailing out irresponsible banks and reassuring wealthy depositors. But if the payday lenders disappear, where will the desperate and poor like Baker turn? Who’s got their backs?”

 

Who has Endorsed a “NO” vote on Issue?

·         The Ohio Chamber of Commerce

·         Ohio Grocers Association

·         Ohio Christian Alliance

·         The Coalition Opposed to Additional Spending and Taxes (COAST)

·         Americans For Prosperity

·         Dr. Tom Lehman, Buckeye Institute for Public Policy Solutions

·         Property Rights, Freedom Fighters

·         National Taxpayers Union

·         Ohio Libertarian Party

·         High Impact Leadership Coalition

·         Call & Post – Ohio’s largest African American newspaper

·         Lake County News Herald, Lima News, Hillsboro Times, The Newark Advocate

·         Hundreds of other Ohio consumers and businesses at www.Ohioans4FinancialFreedom.com

 

Ohioans For Financial Freedom says:

Vote No on Issue 5 to keep your private financial decisions – private. 

Vote No on Issue 5 to keep lending options.

Vote No on Issue 5 to help keep 6,000 good-paying jobs with benefits in Ohio.