Payday Pundit » Ohio Association of Financial Service Centers

An Interview on Payday Lending w/ Jamie Frauenberg

Payday Pundit — Sat, 10 May 2008 11:50:25 +0000

The Bloggers Network conducted this online interview with the head of the Ohio Association of Financial Service Centers, Jamie Frauenberg. Jamie, who is also a Sr. VP at CheckSmart, has been on the front lines these past weeks in the “battle of Ohio.” From the interview:

If the Payday Loan industry disappears, where will people with no credit go?

Customers use payday loans to avoid other fees or less desirable alternatives. They choose between bouncing a check or overdraft protection, incurring late fees on routine bill payments, borrowing from friends, family or church, taking out a cash advance on a credit card, using an online lender or taking out a payday loan. All of these products have a cost associated with them.

Eliminating payday loans just forces people to chose alternatives they had previously tried to avoid.

Recent studies have shown that without payday loans, customers bounce more checks, complain more about lenders and debt collectors, and file for Chapter 7 bankruptcy at a higher rate. One survey found some customers had utilities disconnected, went without a prescription medication or ended up with a damaged credit rating.

In each case, consumers may have been better served by payday advances, which often offer lower fees and do not negatively impact credit ratings.

Economic impact of eliminating payday lending in Ohio

Payday Pundit — Thu, 08 May 2008 20:46:34 +0000

Jamie Frauenberg, President of the Ohio Association of Financial Service Centers

Payday Pundit — Tue, 06 May 2008 15:27:31 +0000

Three facts from Jamie Frauenberg

Payday Pundit — Mon, 28 Apr 2008 15:51:36 +0000

Jamie Frauenberg, President of the Ohio Association of Financial Service Centers, minced no words this weekend in an opinion piece which appeared in the Columbus Dispatch. This sort of clear thinking brings up precisely the points which critics can never seem to answer.

First, the loan is made for a two-week period, not 52 weeks. Why not calculate the interest based on the actual length of the loan? In this case, it would be 15 percent.

Second, using a payday loan to address unexpected financial shortfalls is far cheaper than alternatives, such as bouncing checks and overdraft-protection fees. Eliminating this product in no way affects demand; it simply drives consumers to more costly, possibly even illegal, alternatives. Other suggested options, such as borrowing from coworkers or family members, are simply not practical for many.

Third, delivering these products is relatively expensive because of the associated costs (labor costs, renting and maintaining storefronts, marketing expenses and bad debt, etc.). As a result, the industry average net income on a two-week loan with a $15 fee is $1.28. If the rate was capped at 36 percent, lenders would actually lose $11.37 for every $100 loaned, once the associated costs are subtracted. Obviously, the industry would be forced to stop offering payday loans if such a cap were implemented.