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Anybody else have "Payday loans" on the ballot??

by Steven Haninger / October 24, 2008 10:50 PM PDT

In Ohio, we have an issue on the ballot to regulate lending by smaller "Payday" outlets. These street corner establishments specialize in very short term small loans of a few hundred dollars or less. A typical $100 loan for two weeks carries a $15 fee. This calculates to an annual rate of about 390%. The ballot provision would limit the APR considerably and bring it in line with credit card rates. As well, it would limit the number of loans a person could take out in a 1 year period. There are many good, IMO, arguments on both sides of the issue.

Those against the proposal say it will give no choice to poorer persons who need emergency loans. They say the fee for the small loans may actually be preferable to credit card late fees they might incur by not borrowing the money. As well, they claim it will put many of these loan institutions out of business costing the state thousands of jobs. As well, they say that borrowing is a private matter and that the proposal, in order to limit the number of loans a person could take out, would mean collecting personal data on these people.

The proponents of the proposal say there's a need to break the debt cycle and that many people find themselves in a never ending need to continue to borrow money...that taking out a $100 dollar loan to make the minimum payment on a credit card in order to avoid a late fee is not a solution. They also say that jobs would not be lost as these "Payday" lenders are already applying for licenses to operate under the restrictions...that they have no intention of closing.

I have mixed feelings about this one. My first thinking is that folks need to swim in the water they voluntarily jump into. I suspect most folks in this situation did just this but that a few were pushed. I will probably vote "Yes" to restrict such businesses and hope more good than harm will come of it.

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The topmost link is quite telling
by Steven Haninger / October 25, 2008 2:22 AM PDT
In reply to: Some info

It looks like a way to fleece some of the most vulnerable while appearing to be helping. In the long term, I can't think it does.

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TN has an anti-usery law
by Angeline Booher / October 24, 2008 11:59 PM PDT

..... but these establishments thrive. I might add, so do credit cards with what I think are exorbitant interest rates. As the credit card execs say, they are actually loaning their customers the money, And they can raise the rate at their pleasure.

These short term loans are supposedly used in emergencies, but are really used more regularly to stretch a paycheck to make ends meet.

I don't know if a pawn shop would offer a better deal to get $100 for an item.

If the Ohio bill would put a cap on how much interest could be charged, that would be something to consider. $15 doesn;t sound like a lot to pay until one looks at the interest rate, of course, the companies will say they need that much to operate.

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I'd have to imagine their overhead could be high
by Steven Haninger / October 25, 2008 2:42 AM PDT

and I don't know what percentage of loans they make are never repaid. I understand that they often require a personal check to be made out for the loan amount plus their fee at the time of the transaction but they delay cashing the check for the specified period of the loan. Of course if there are not sufficient funds in the account when the check is cashed, overdraft and return check fees apply. Such compounds any other problems a financially strapped person has. I'm sure any payday "store" needs to develop a fairly large client base to stay in business and would need to locate in low rent areas. They won't make that much per transaction so their rates are naturally quite high. If your sole business is selling lollipops to children, you'd best not put your store in the middle of a retirement village unless you can get a hundred bucks per Dum Dum. Happy

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You are correct about the locations.
by Angeline Booher / October 25, 2008 4:17 AM PDT

A real estate person here inherited some bought years ago, has done absolutely nothing to upgrade or improve them, so rents to tenants that could care less. Thus the short term loaners, and similar, paint the fronts in garish colors, cheapening the corridor to where businesses care.

The credit card companies use the same arguments- expenses, and covering the bad debts. Happy

I reckon that is true.

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