Senator Durbin’s 36% rate cap bill, which would kill short-term lending like payday loans, may be offered as an amendment–Amendment 1089–to the Credit Card Bill of Rights legislation currently before the senate.

CFSA is suggesting you write your Senators and urge them to oppose this amendment and protect consumer credit access.

The Phoenix Business Journal reports that “200isNoReform.com” is now “Arizonians for Responsible Lending,” yet another branch of the Center for Responsible Lending and is working to strip Arizonians of their financial choices by capping payday lending at a 36% annual interest rate. The Payday Pundit has said it once and will probably have to say it a million times…payday loans are not annual loans, they are not mortgages, they are short term, low dollar loans. Applying an annual interest rate to them is akin to trying to rent a car for a weekend and the agent telling you how much it would be to buy the car. It makes absolutely no sense.

Saul W. Adelman, Associate professor of finance at Miami University  in Oxford, Ohio has this to say in a letter to the Columbus Dispatch.

Ohio House Bill 545, which is headed for debate in the Ohio Senate, should not be approved. This bill, which would cap the annual interest rate for payday loans at 28 percent, supposedly would help individuals who opt to use payday-loan services. This is a populist bill that ignores reality and would result in the opposite happening.

This letter in the Steubenville Herald Star gets right to the point:

The payday lending legislation approved by the House of Representatives hurts Ohio’s workers, consumers and the economy.

Let’s be clear: A 28 percent annual rate cap is a ban on payday lending. A 28 percent APR cap allows a fee of less than 8 cents a day, which is not enough to pay salaries and benefits, rent or other overhead costs.

What is at stake?

More than 6,000 jobs with benefits such as health care and retirement are on the line. What is more, a regulated short-term credit option will be ripped from the hands of Ohio consumers who will be forced to choose between less desirable and more expensive alternatives.

The hard reality is that employed, hard-working Ohioans sometimes fall short of cash between paychecks. It’s easy for people who have nothing to lose to call for a ban. Their jobs aren’t on the line and they have likely never used (or even needed) a payday advance. But let’s do the responsible thing. Let’s put in place laws that will help consumers, not hurt them by taking away choices. Ohio consumers deserve reform — not a ban.

Hundreds of employees have attended legislative hearings, and thousands have reached out to their representatives through e-mails, letters and phone calls. Nearly 30,000 customers have written letters, urging legislators not to take away a personal credit choice.

Unfortunately, the voices of employees and customers, the people that matter most, landed on deaf years in Ohio’s House of Representatives. We hope senators will listen.

Jamie Frauenberg

President of the Ohio

Association

of Financial Service Centers

The Ohio Senate Finance Committee is holding a hearing on payday lending legislation.   Senator Joy Padgett just said, “Let’s not pull the rug out for underneath the customers.”   Representative Chris Widener said that all problems could be solved if we limited loans to 25% of a person’s pay.  Widener, however, supports a 28% rate cap. 

So says State Rep. John Domenick in today’s Herald Star.

“The reality is, payday loans are an unfortunate necessity for many Ohioans,” Domenick said. “Many people cannot make ends meet living from paycheck to paycheck. Job losses and the failed economic policies of the Bush administration have put an increasing number of people in this situation.”

Domenick noted more than 1,600 payday lending offices operate in Ohio with about 6,000 employees. He said owners testified that a 28 percent interest cap in the bill that passed the Ohio House would drive them out of business.

Here is a complete text of a letter to the editor in today’s Cincinnati Enquirer:

PAYDAY LENDERS PROVIDE NEEDED SERVICE

The front-page headline “Bill would crimp payday lenders” (May 1) was wrong; it should have read “Bill would kill any option for payday loans for people who need them.” Our government representatives are again protecting us from us, by mandating how much interest can be charged for a payday loan.

As quoted in The Enquirer, “a lobbyist for Ohio Financial Service Centers Association said the 28 percent cap will put payday lenders out of business, eliminating 6,000 jobs.”

There are many people out there who need these services; people who have no other option for credit, but obviously need a loan. They are a higher risk simply because of their condition. Traditional credit facilities often won’t touch them. If the service is driven out of the state by this legislation, where will these people go when they need that help?

This legislation is a bad idea.

Chris McCormick, Amelia

Media advisory: 

STATEHOUSE RALLY TO SAVE PAYDAY LENDING JOBS

Leaders of Ohio’s payday loan industry, along with hundreds of employees and customers, will hold a rally on Tuesday, May 6 at the state capitol.

They will call on Senators to reject House legislation which caps the annual interest rates on payday loans at 28% — eliminating the industry in More than 6,000 jobs are at stake.

Industry representatives and its supporters will explain the impact of House-passed legislation on workers, the economy and on working families in Ohio.

WHAT: Rally and press conference to discuss impact of House-passed legislation on Ohio’s leading payday lending companies.

WHO: Payday lending employees and customers, other supporters of the industry

WHERE: North Steps, State Capitol Building, Columbus, OH

WHEN: Tuesday, May 6th, 11am

This Columbus Dispatch story has more information than the Cleveland Plain Dealer story below.  Key passage:

After months of debate over bills that were backed by either the payday industry or consumer advocates, the proposal that passed the House 69-26 is a victory for the Ohio Coalition for Responsible Lending, which pushed to lower the current 391-percent annual interest rate on two-week payday loans.

The group got a bill even more restrictive than it requested. It sought a maximum 36 percent interest rate and got 28 percent. The coalition wanted to limit borrowers to six loans per year, but the bill imposes an even tougher four-loan limit.

A victory for an advocacy group, but a defeat for consumers, and a defeat for more than 6,000 workers who will lose their jobs if this bill becomes law.  

The jobs of more than 6,000 Ohioans are on the line as the Ohio House passed a bill imposing a 28% annual rate cap on loans, essentially a $1.08 fee per $100 loaned.   Here is the Cleveland Plain Dealer story.  The bill now goes to the Senate where half the Senators are in support of a 36% rate cap.