![\"user-pic\"](\"/css/images/default.gif\")
I voted on this one. It's a no brainer. I remember a PBS special which said ... \"there's a lot of money to make off the poor.\"
Not any more for these sharks in Ohio. Score one for the good guys.
Now let's get on to nationalizing healthcare. At this pace, you will have to be rich in 2050 to receive any health or dental care.
Not sure who got this wrong - Issue 5 in Ohio was a choice placed by the state legislature into the law allowing the citizens to chose between A) capping interest rate and length of loan to short period (28% and 30 days I believe) and B) higher interest rate and longer period (38% and 60 I believe).
This was not a referendum on the law nor was it an attempt to repeal the law.
By-By pay day lenders - and Good Riddance!
Eliminating pay day lending institutions eliminates options for low income people who may need short term liquidity. Financial institutions won't make loans to high risk parties if they cannot be adequately compensated for said risk. This will cause more missed car/house payments, or worse, will turn people to the black market to find money, which can have much higher interest rates and can be dangerous.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-25844-100x100.png\")
@chuckv: And, heh... most \"black market\" lenders (e.g. the Mafia) are actually better about dealing with late borrowers than PDL's. The Mafia doesn't break kneecaps any more, that doesn't get them their money any faster. They make their money today being more nimble (e.g. lower rates, better terms) than PDLs.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-210047-100x100.png\")
@chuckv:
Well, I hope they don't go to the so-called \"black market\" but it is almost always a better choice to default than to get a pay-day loan. Remember, default only hurts if you lose equity unless you plan on securing more credit before your FICO recovers. That's usually the least of a pay-day lending user's problems.
@chuckv: Payday lending institutions aren't being outlawed, it's just a cap on interest rates. If you can't stay in business charging 28% interest, then you deserve to fail.
@chuckv: It's a vicious cycle. Banks give mortgages, auto loans, and credit cards to people who can't afford them. Then they turn to Pay Day lenders who start a cycle of renewable loans that these people can never get out of, just so they can make one car our house payment. Then, everyone cries, \"Think of the poor!\"
What a bunch of hogwash.
Twenty years ago, there were no payday lenders, because banks didn't loan people money they couldn't afford to pay back. When people got over their heads, they went bankrupt and their credit was ruined for ten years and they lived in a (GASP!) apartment and drove a beat up, fifteen year old Chevy for a while.
Stop the insanity. Stop the stupid mortgages and the even stupider payday loans to back them up. Make people live within their means again. Otherwise, our economy will never recover.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-6173-100x100.png\")
@chuckv: There is profit to be made in lending to low-income borrowers. Self-Help Credit Union in North Carolina has (or had, last I looked) the lowest mortgage and small-business loan default rates in the state, and they loan basically exclusively to high-risk, low-income borrowers. There's mandatory education with the loans, which dramatically reduces repayment problems -- even with middle-income, lower-risk borrowers.
There's no reason it can't work on a smaller scale as well.
@chuckv:
I actually saw a news article that was talking about non-profits in NYC that were trying to replace pay day lenders. The idea being that removing the profit margin would allow them to drop the interest rates to something reasonable.
Problem was, the default rate was so high, they still had to charge nearly 300% APR in order to break even without massive infusions of cash....
State referendums are running amok. Corporations pay tons of money to get signatures for bills in their own interest. Here in California several \"alternative energy\" propositions were paid for by big corporations. I would like to see a law that states that only volunteers may gather signatures for ballot issues. I bet that anti-usury law would never have made the Ohio ballot.
@SunsetKid: California has it's own special stupidity that is not present in most other states. The voting populace can pass laws and amend the constitution directly. That means anyone, since big corporations hire the voting populace. That's why you have a crazy labyrinth of competing laws about revenue and spending that keep the budget gridlocked almost all the time.
Good luck with that! I'll take my representative government any day.
@humphrmi: I wouldn't necessarily call it \"stupidity\", but Arizona has the same setup. I like that we get a say-so in amending the constitution, and I actually research before I vote. However, the cons are: voters who do not research before voting, and people who get paid for the signatures they collect for ballot initiatives. They don't just ask for your signature, they harass and antagonize until you sign (which I never do).
Maybe it is stupidity.
@misslisa: Voters in other states also have a say-so in amending their constitutions, its just not directly. I can't think of a state that doesn't require voter approval of constitutional amendments. It's just that not any Tom, Dick or Harry can propose constitutional amendments and have them end up on the ballot, they have to be vetted through our elected representatives first.
That's how California (and I guess Arizona) differs.
FWIW, the ballot measure passed , with the wording to uphold the measure.
Stating that Ohio voters failed to repeal the law made me double check if the vote had won...
![\"user-pic\"](\"/mt-static/support/assets_c/userpics/userpic-81067-100x100.png\")
Agreed. I had to read that a couple times and parse it out in my head to figure out what the OP actually meant.
@Donathius: Yeah, I live in Ohio, and I had to re-read that part of the ballot just to make sure I was voting the right way. So it doesn't suprise me that articles about it are confusing as well.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-87183-100x100.png\")
These places are legal loan sharks. When I was in the army several of my friends got stuck in the cycle of borrow, pay interest, borrow a bit more, make a payment, pay interest, borrow more, etc. It's a tough cycle to get out of.
If a person cannot get a loan he or she should evaluate other options. A secured or co-signed credit card that is paid off or paid in installments will help build credit and allow the person to borrow form a respectable institution. Also, people should feel that they have to borrow money from banks. Credit unions are a lot better than any commercial bank and since they are member owned they are a lot more flexible and open to making loans to people with not-so-good credit.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-27503-100x100.png\")
@citking: I remember when my husband was in the Navy and they overpaid him and took almost a full paycheck, my husband went to one of these scam artists just to get food in the house. We made too much for food stamdps and WIC, but had no money for food by the time everything was said and done after the Navy was done with their \"overpayment\". After we went to one of these scam artists it just got more worse. We were sitting on a floor and starring at blank walls for almost 6 months, in base housing no less. It was pitiful. It all finally came to a head one day when my husband was out to sea, I went to pick up his paycheck and I was told he didn't get a paycheck that month. I looked at the clerk and said she could explain to my 4 month old why she could sit in one diaper for the next month and couldn't eat. They said they would hold off on it until my husband reached shore and sent me to the Marines outreach (?) office and they gave us some diapers for the next few days and sent us over to WIC. The office also sent us over to JAG, I believe it was, and they helped us to get out of our contract at a reasonable rate. I would never do a payday loan to save my life again and now I warn everyone I know about anykind of scam I know of. (My brother-in-law keeps trying to get me to sign up for email lotteries. I try warning the boy. They want to send him a check to verify his account, then have him send him back some money, then they'll send him the rest. --SCAM-- In one ear out the other though.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-113188-100x100.png\")
In somewhat related news, in Arizona the law allowing pay day loan shops to exist expires in 2010. The payday loan industry sponsored Proposition 200 \"Pay Day Loan Reform Act\" that would have extended their permits beyond 2010 and thankfully Arizona voters rejected it last week. If the will of the people is respected by state legislators, pay day loan shop's days are numbered in the state.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-204754-100x100.png\")
@MentallyRetired: I sure hope so. I'm one that voted against Prop 200. I'm glad the people of AZ saw through the so-called \"reform\" for the payday loan industry. I look forward to driving through Mesa w/o seeing 3 on a corner...
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-116400-100x100.png\")
@WhiteTrashLegend: Nobody looks forward to driving through Mesa :P
I guess I can't really talk -- I have to drive past Apache Junction on my way home :(
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-160874-100x100.png\")
@MentallyRetired: I am *so* glad that Arizona voters were able to see past this \"reform\" proposition for what it was. The payday loan industry spent roughly 18 million dollars in advertising.
I knew something was up, however, when I saw \"Yes on 200\" posters on the windows of payday loan offices!!
Here in Ohio, we're serious about having people learn from their mistakes.
If you don't have enough money to pay for something, then you shouldn't purchase it.
If what you're purchasing is going to have a negative effect on your state of life, e.g., not being able to pay the bills, then you shouldn't be purchasing it.
If something bad happens and you need cash quick, well, you should already have cash set aside for such an occasion. If you haven't done so already, start now.
If you REALLY need cash, go to a friend or relative. If you don't have friends or relatives, use a credit card.
No credit card? Sigh...just figure it out for yourself.
Need I go on?
@firestarsolo: And here's only one of the many things wrong with Ohio. We've become such a freakin nanny state they might as well call us Little Brittain.
As for the payday lenders, I'm sure they'll just start charging hefty \"administrative\" or \"originating\" fee, kind of like the banks.
@dewsipper: Nanny state? We just pulled a Texas and made it legal to kill someone breaking into your home...I really don't think we're \"Little Britain\".
I'm glad we voted this down, there ARE alternatives to payday loans, talk to your creditors if you can't get help from friends/family/social services/church/etc.
![\"user-pic\"](\"/mt-static/support/assets_c/userpics/userpic-368496-100x100.png\")
My suggestion for those that need money to eat, car repairs, emergency funds is to locate firestarsolo's house and constantly ask for money. He wants that gap between well off and poor so he can feel superior to others because he might have more. If payday loans go away, my suggestion is for people to form coops and boycott businesses and drive fivestarsolo's prices up and income down.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-56339-100x100.png\")
@FrugalFreak: To be fair, I don't think firestarsolo is openly hostile to the poor, I think he is just out of touch and doesn't realize that there are people who are too poor to both eat and pay the bills. Of course, he has had plenty of opportunity to learn, so it is hard not to conclude that he only believes what he does because he wants to.
@firestarsolo: In other words, \"be richer!\"
Good plan!
\"If you don't have enough money to pay for something, then you shouldn't purchase it.\"
True. If you can't afford food, then you shouldn't purchase it. Steal it or starve!
\"If what you're purchasing is going to have a negative effect on your state of life, e.g., not being able to pay the bills, then you shouldn't be purchasing it.\"
Hey, good idea. If you can't afford to pay the bills, then just don't do it - that way, you have money left for paying bills! Oh wait.
\"If something bad happens and you need cash quick, well, you should already have cash set aside for such an occasion. If you haven't done so already, start now.\"
Be richer! If you can't be richer, then stop eating.
\"If you REALLY need cash, go to a friend or relative. If you don't have friends or relatives, use a credit card.\"
Have richer friends/relatives! These are fantastic (and impossible) suggestions for so many people!
\"No credit card? Sigh...just figure it out for yourself.\"
Might I add: good luck!
\"Need I go on?\"
No, you've made your position unquestionably clear.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-2180-100x100.png\")
@firestarsolo: Wow. I thought that this bill was to keep the PDLs from preying on the less fortunate. I suppose you want it because.. What. \"Fuck the poor?\"
Nice goin' buddy.
There is nothing wrong with a 391% apr on a one or two week loan. That is a 15% interest over a 2 week period. Which is a 15 dollar fee for every 100 dollars you borrow over a 2 week period. They should be allowed to charge such fees for the initial loan period. Then have to drop down to a conventional interest rate when the person fails to pay. In contrast a 28% apr would only allow them to charge 1 dollar per 2 week period. If they can only charge 1 dollar per 100 dollar on a 2 week loan there is no way to make any money.
I used to be the VP of IT for a large payday lending company (500+ locations)...I worked there for over a year before we were acquired by a competitor. I have been in the stores and seen the good sides and the bad sides of payday lending.
In my estimate, 20%-25% of the people that use the service are in there for the wrong reasons. I have seen women come get loans and walk to the nail salon in the same center; I have seen men take their $$$$ and go to the electronics/rent-to-own next door.
However, the remainder of the people that use the service have no other place to go for short-term liquidity. If they have credit cards, they are maxed out; if not, they don't have the type of personal balance sheet that would allow them to get a short term loan at a bank or credit union. Most of the references they give us wouldn't qualify as co-signors.
Yes, the rates they charge are outrageous (sometimes criminal)...but what's the APR for BoA's $32 fee on a bounced check?
I don't want to start a flame war, but I think the question that no one has been able to answer is by outlawing or regulating the industry how are you solving the immediate problem? When these branches go out of business, where do the people go for short term needs? They may have one or two things they can pawn, but then what?
@bpclay:
What the heck is a VP of IT doing at branches watching what a customer^H^H^H^H^H^H^H^Hvictim does with the money after borrowing it?
@Corporate-Shill: Amen to that.
Look, \"personal responsibility\" is important, but family and community responsibility is just as important.
Why is there such a family breakdown in these communities? It's not because they're poor-- it's because people turn to these sorts of mechanisms to get by.
For most of history, you had your family and your friends to get you by. That system works.
@bpclay: You make some really good points, but to answer your question:
When these branches go out of business, where do the people go for short term needs?
Will there be people that will be hurt by the loss of payday loans? Yes. However, I guarantee that this number will be smaller than the number of people that or people that are currently being victimized by payday loaners.
@nobodyman: People seem to be leaving out the major support network that had worked for this country for many, many years - the churches. If you set the wayback machine for several decades ago, it was the churches and other LOCAL charities that would take care of their own in emergencies. Unfortunately, you don't see much of that today - we seem to have lost our sense of community.
@nobodyman: [a]Are grocery stores going to give them food when they don't have money to pay? Will banks give people with no credit, no cosigners, and no references money? Will check-cashing centers give people money without a check to cash?
[b] So in other words, screw the poor? Yeah, some people don't use these places responsibly, but others have to occasionally in order to eat. Also, why is it our responsibility to protect people from themselves?
@unpolloloco: It is not our responsibility to to protect people from themselves! HOWEVER, it is pure wrong to try to profit from their misfortune.
@unpolloloco: If people don't have money now, they will be even worse off when they have to repay a payday loan *later*. Do not fool yourself: these payday loan centers are *no friend* to the poor. It's inhuman to think that poor people are forced more 250% interest rates while the middle class has to pay no more than 29%.
If these payday loan places cared so much about poor people, they'd be non-profits that charged reasonable interest rates. Instead, they are little more than vultures.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-385143-100x100.png\")
Our government isn't financially responsible why should I be? Bring on the 299% APR I need to pawn my 86 Grand Am for lottery ticket cash!!!!
![\"user-pic\"](\"/mt-static/support/assets_c/userpics/userpic-522765-100x100.png\")
These loans often are used by low level drug dealers to buy the drugs. That way they don't have to loan from the drug wholesalers, which can be dangerous if you don't pay up.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-314204-100x100.png\")
@nerdychaz: You're high right now aren't you?
In the 20 years that I have been involved with drugs, and drug dealers of all sorts, I have never in my life heard anyone use the term drug wholesalers. Where are they? I have very important things to discuss with them.
Also, most payday loan places don't loan more than 500 or so bucks at a time, that really doesn't buy a lot of drugs. Certainly not enough to \"deal\" them. Certainly not enough of a monetary loss for a \"drug wholesaler\" to risk attention by doing whatever it is you think they do if someone doesn't \"pay up\".
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-568700-100x100.png\")
Yay for Ohioans for this law. Other states should follow suit and get propositions like this on the ballots.
Some people in Ohio (and, sadly, Arizona) are no longer able to get money from Pay Day lenders, which means they are no longer able to buy things, which means the economy continues to suffer.
Why do you hate America?
@howie_in_az: The economy shouldn't be built on the house of cards that is the nation's debt. It might be good in the short term, but it has horrible ramifications in the long term.
@WhiteTrashLegend: So you're advocating legislation against stupidity. Let me know how that turns out.
Furthermore, where do you stop? I think 25-30% APR on a credit card is outrageous, are you going to ask Uncle Sam to end those as well? The 4.9% I'm paying for my car is also entirely too high. Fix it, gubment!
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-205831-100x100.png\")
They tried to pass an initiative here in Arizona that was marketed as \"payday loan reform\" but was really just extending their business licenses through the current expiration date of 2010. They were given an exemption to the 36% state cap on interest rates through that date.
Fortunately, the voters of Arizona saw through this and voted it down. In 2010, the cap on interest rates should go back to 36% and hopefully these places will start to disappear as they have in Ohio. There are far too many of them here.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-229990-100x100.png\")
I live in the shitty state of Ohio and I voted to keep the law. Screw those a-holes.
If people want to pay 291% who am I to stop them?
Nobody forced anyone to go to these places. If people don't like the service provided, they would not be on every corner.
I too may be missing the point. Obviously they get enough business to have a large chain and most likely everyone on Consumerist has never used their services. BUT, for those who do not have a checking account, or other means of short term borrowing, this sounds like a valid business.
I would assume that these borrowers do not have stellar credit references, and the interest rate reflects the risk involved in the lending.
BUT unlike a loan shark, these are businesses. Closing these stores will force people into the underground with a lot worse of an interest rate and a LOT worse of late payment 'penalties'.
Basically, closing down these stores is the equivalent of sending people to the back alley with a wire hanger (for those who understand the comparison). It's a mistake.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-10718-100x100.png\")
@jdmba: Uhhhh... I'm pretty sure getting a back-alley abortion that has a good chance of killing you is a wee bit worse than being broke for a week. I'm pretty un-PC but that comment had me cringing.
I do admit I'm leery of the government regulating personal responsibility. However, the lenders affected practice a form of predatory lending. For most borrowers, one or two paychecks is rarely enough to cover the loan. The borrower is forced into a cycle of borrowing more just to keep up payments on the loan. These sorts of lenders base their business model on their debtors' inability to pay off their loans.
Besides, I'm guessing that once the \"easy\" money shops are no longer available, people WILL find other ways to get by - ones they'd previously overlooked because the shiny \"GET MONEY FAST\" sign was blocking their view.
![\"user-pic\"](\"/mt-static/support/assets_c/userpics/userpic-78160-100x100.png\")
Just a minute here,all of you folks defending these crooks interest rates as reasonable.
These companies can go to Wall Street and borrow money at pretty advantageous rates. (Typically around 6-8 %) and turn around and loan that out at 28% with the new law that they just voted on. Now,there are a lot of deadbeats that won't pay. That's a given. But making 20% before losses and overhead should make for a tidy profit for these companies- UNLESS they do absolutely no credit screening whatsoever ,in which case they get in trouble pretty quick.
Seems like their old business model (the 391% ripoff) was designed to make money whether the majority of borrowers paid or not. Time for a new model. In Ohio.
Don't shed too many tears for these assholes.
@Snarkysnake: Just so you know, these companies are forbidden from doing any type of credit screening unless they operate as a \"bank\" (as they do in michigan and many other states) and are regulated by the FDIC. They screen people by having them bring in two months worth of pay stubs, ID, provide three personal references, employer contact information....anything that proves you have a job and helps them track you down.
Even with all that information, you would be surprised at the number of people that don't pay. When I was in the industry 5 years ago, the average rate for \"skips\" (non-payments) was between 12%-25%. If your rate was less than 15% you were considered outstanding; Internet companies charge higher rates because their delinquency rates are closer to 50% on average.
It doesn't take a lot of education to realize that if an average branch has 500 active loans, an average loan of $300, and a 15% skip rate, that's a lot of money you are out.
I'm not trying to start a flame war, but at some level you have to put personal responsibility on the person that initiates the loan. Most states require four signature/initial points to initiate a loan; a minimum of two are related to interest paid, fees, and APR. The people who take out these loans do it of their own will, they are told what the rate is, and they are told what the fees are. They choose to take out the loan....if they think it's outrageous or unreasonable, they don't have to get the money.
In my experience, if they had access to another source, with a reasonable interest rate, they wouldn't be there taking out a payday loan. They are there because their credit is maxed out/wrecked, they don't have friends/family to borrow from, and any other \"traditional\" lending institution wouldn't touch them with a ten-foot pole....they don't own their own homes (the overwhelming majority of them are renters) and don't own their cars out-right, so they don't have anything meaningful for collateral.
@bpclay:
Okay, I hear you. Didn't know that the companies cannot do rudimentary credit checks. This is part of the law that needs fixin'.
On your other point, I very much believe the \"skip rate\" . I am a bail bondsman. I deal with many of the same people that haunt these places. (Indeed,many stop there for cash before they come and see me). I learned very early on that you cannot extend credit to people with no ingrained proclivity to pay it back. I swore off credit after a few bad experiences and it has made my business better than ever. ( People that won't pay for their bail usually won't show up in court,either ) .
So , your point is well taken. A lot of these folks make their own situations impossible and deserve no credit whatsoever.
But I still think 391% is an unconscionable rate. It all but guarantees that the person that takes the loan becomes a slave.
@Snarkysnake: Not every single payday loan is 391%. In the United States, finance charges on payday loans are typically in the range of 15 to 30 percent of the amount for the two-week period, which translates to rates ranging from 390 percent to 780 percent when expressed as an annual percentage rate (APR).
when people say they're charging 500% interest, that really is misleading. they do have installment loan products with horrific rates of interest, but most of their business is small ($100-$500) loans over short (people generally seem to be outraged at the exploitation of vulnerable consumers. but guys, default rates are really high in the demographic they serve and it costs something to run a lending operation. these companies aren't making bonanza profits. industry leader \"Cash America International\" had a 14.3% pretax margin in 2007 -- nothing like 300%.
it's a competitive world. if it were profitable to offer people loans for 200% you can be sure that \"the 200% money shack\" would be opening across the street from \"500% ez cash.\" like some other posters have said, there are lots of truly poor people in this country, and when they are hard up for liquidity these places (while unsavory and sad) do provide it at a price that they can pay. like a lot of well-intentioned reform, this action will make activists feel good about themselves while hurting the people they meant to help. i don't think we should be celebrating this.
@OrsonSparrow: The pay day lenders are quite hopeful that none of their loans are limited to 4 weeks. Huge fees and the willingness to lend far more than people make each paycheck ensure that PDLs get to renew their loan portfolio every month. Then it's just a matter of carrying those loans long enough to ensure that their ongoing fees from renewable loans outperform default rates. It's like shooting fish in a barrel for them.
(Assuming there are 4 to 5 employees per branch)
Well done Nanny State. You've put another 163 people out of work in the teeth of a nasty recession.
@howie_in_az: Specious argument. To the best of my knowledge, no bank has asked for a $700,000,000,000.00 handout from the government either.
\"Unfortunately, as we communicated throughout the campaign, operating under the restrictions set forth in House Bill 545 is not an option,\"
Gosh, that's just terrible! Good riddance to them - freakin' ticks...
The fact that 99% of banks can charge interest rates on short-term loans for as low as 10% or less, and manage to stay in business, proves payday lenders are unnecessary. Wasn't half of the reason we're in this mess right now is because people couldn't drag themselves out of debt? How is 300% interest supposed to help them do that? Shit, even 28% is ungodly.
These businesses are nothing but slime. Crying a river over the loss of jobs in payday lending is like crying over the loss of a business that traffics young women. The people worked for sleazeballs; they should have known it wasn't going to last. Hopefully, some banks or more upstanding lending services will take their place.
These businesses are nothing but slime.
Are you referring to the banks that need to be bailed out with taxpayer money because they loaned money to people that had no chance of repaying?
If payday lenders were destined to fail, then simply let them fail. To the best of my knowledge, no payday lender has asked for a $700,000,000,000.00 handout from the government.
If they can't make it with just 28%, why didn't they close ALL of their stores?
I voted a few weeks ago. I voted against the Payday Loans. Here is why, I feel that ~400% APR on a loan a year is excessive. 500$ is enough money to take care of food for a week. These loans are \"secured\" much like student loans, once you have one they are yours!
So one needs to take a loan out for 500$ and then they lose their job. At 365% interest, compounded daily for 1 year if no payments were made would be $18,704.00.
If that is not predatory lending I don't know what is, and remember this is secured, there is no bankruptcy.
I hate these places but why can't they just dropped the whole interest concept all together and charge random service fees. Banks and other companies do it all the time.
@corinthos: When lending money, law (federal I believe) mandates that all fees and other things be rolled in to the APR. While they can say that if they give you $100, you owe them a $15 fee on top of the $100, they have to disclaim that it is a 300% Annual interest rate (even if short term is only %15).
The only good thing about those places is when you move to a new town and get a new job and have to open a new bank account. BofA would only release 100$ of my paycheck (from the company located directly opposite the branch) for a week. This left me in a pinch to say the least!
First, Check 'n Go is only cutting 75 jobs, a far cry from the thousands that the payday lending industry was claiming would be lost as a result of Issue 5 passage. Secondly, Ohio payday lenders are already trying to circumvent state law by offering \"micro loans\" that have a $15 origination fee with the 28% APR tacked on top of that - resulting in an interest rate even higher than the old 391% APR.
The payday lending industry is obviously trying to circumvent Ohio's new law and skirt it's intent. House Bill 545 and state Issue 5 passed, affirming the 28% APR rate cap on payday loans. The 28% cap prevents hundreds of thousands of Ohioans from being caught in the never ending cycle of payday loan debt. Ohio voters saw the payday loan product for what is was: a defective and predatory product designed to trap borrowers in debt! Let's hope the Ohio's Attorney General and outside counsel ensure that lenders comply with the new law. The $15 origination fee is the same as 391% APR interest. They are trying to charge even MORE than that now! That was clearly not the intent of the law and it's too bad that the payday lenders have a problem adhering to the law and the wish of the voters!
Voluntary transactions between mutually agreeing parties is never \"evil\" or immoral. I'm no fan of lenders of any sort, but by saying that these payday lenders are any more evil that the corporate suits bilking the taxpayers out of billions right now is a farce. While you nanny-staters are crying about a $15 service fee your children are being enslaved by the deficit-spending bailout that will obligate them to paying thousands of dollars in taxes over their lifetime. You're being penny rich and pound foolish. Poor people with bad or no credit should absolutely have access to loans. Why should we all be subject to an oligopolistic Federal Reserve banking system when we need a few extra bucks to make ends meet?
@ganjablue: Uh, right. Since we can do nothing about the US bailout of financial institutions, we should just keep quiet about PDLs raping people.
Right.
\"A form of evil??\" Are you kidding me? That is PRECISELY the kind of warped uneducated opinion that contributes to the ongoing myths about the PD Industry.
1) PD loans are intended to be for a short period of time. They aren't meant to be a regular source of income.
2) The current model is $15 per $100 borrowed, which is waaaay cheaper than bouncing a $100 check at Fifth Third or any other bank. The average national bounced check is $28.95-- ridiculous!
3) Thousands use PD loans to get gas, food, medicine, etc that can not wait til next pday. They aren't spending it on exotic vacations... they are using it to meet basic daily needs.
4) Eliminating PD loans in Ohio DOES NOT in any way eliminate the need.
5) Mature, consenting adults weigh the choices and make the best decision based on their situations-- who are we to judge or tell them no?
6) During our current precarious economic situation, losing even one job is too much!
Real Evil - is irresponsibly spewing myths without researching, reviewing and understanding the business model, talking to customers who use the service, studying the impact the law will have and not realizing that financial freedom is at stake.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-157039-100x100.png\")
I'm really glad my fellow Ohioans voted to give these guys the boot. I know way too many people who've become almost addicted to payday lenders. And as for complaints that jobs are being lost...Well the job climate is pretty bad here to begin with. It's a drop in the bucket as far as I'm concerned, and keeping the stores around is not going to be the solution to that sort of thing.
The problem with payday loans is if you live paycheck to paycheck and need a loan based on that you can never get out of debt. The default rate is so high because the interest rate forces defaults. The people who use the service now should call the person company they owe the money too and let them know they can not afford it. All states have heating credits for poor people. Your landlord is likely going to work with you if you are honest and upfront with them. If you cant make these payments currently, how in the hell will they be able to make another payment that never will go away.
These rates are usary and should be illegal in all states. If that CEO says they cant make a profit doing it, I guess he may need to collect unemployment
I'll try to address a few comments:
Oregon reined in its 529% APR lenders, with a cap of 36% APR plus a $10 processing fee. With the fee, APR works out to roughly 100 percent. Borrowers are limited to one loan at a time and licensed lenders use a networked database to restrict multiple loans.
Only the most predatory lenders packed up and left; loans are still readily available and the remaining lenders are enjoying larger slices of the pie which did not get smaller.
Congress passed a 36% APR cap on loans to active military personnel due to military implications of payday loans. (e.g. high-interest loans trash your credit, then you can't get a security clearance and your assignment/deployment options are reduced.)
Also, a lot of lower-income people are getting squeezed by higher housing, health care, food, and energy costs while their low-end wages are stagnant.
You can argue that they are living beyong their means, but as someone paying 65 percent of my income to rent a room in a house with nine people, I can say that many of these people are living frugally on limited incomes.
This doesn't happen in a vacuum; and every time NIMBYs block new housing, there are very real consequences, especially at the bottom of the economy
It's been pointed out quite a few times that these payday loan interest rates are so high because in most cases they are a flat fee charged rather than a straight interest rate. Looking at them as if they were interest rates is not really fair.
I say this as someone who thinks these type loans are incredibly unwise. But consumers are adults and get to make their own choices. It's not some fineprint that charges the fees that are imposed it's clearly stated in black and white how much it's going to cost.
![\"user-pic\"](\"http://consumerist.com/assets_c/userpics/userpic-24730-100x100.png\")
If the idea is to put more money in consumers hands, then is this good or bad? Thoughts?
Yes, I know the interest is high. I am curious as to what others think and yes I know I am on the consumerist and no I am not new here.
@jdhuck: These loans often are used by low level drug dealers to buy the drugs. That way they don't have to loan from the drug wholesalers, which can be dangerous if you don't pay up.
@jdhuck: For one thing, they prey upon the poorest segment of the population. Middle-class families would be more likely to go to a regular bank. It seems criminal that to charge ridiculously high interests rates to those that are the least able to pay them
@jdhuck: Bad because of the non-negotiable terms and ease of getting it.
For all purposes its a legal loanshark.