Payday lending controversy hits the airwaves

By Mike Ford, The Delphos Herald
Published:  Tuesday, August 26, 2008 (2 months, 3 weeks ago)
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“I’ve been studying this payday issue and you wouldn’t believe what our politicians have been up to,” says a “farmer” in a recent television ad.
The actor is seen standing near a red Chevy pickup truck on a dirt road next to a corn field. The “payday” issue he refers to is actually payday lending.
The loans are high-interest, short-term loans for which borrowers write a personal check. Then, the lender waits until the customer earns his or her next payroll check before the personal check is cashed.
The Ohio General Assembly and Governor Ted Strickland recently changed the laws governing the payday loan industry, capping the interest rate at 28 percent and limiting the number of loans to four per year per borrower.
The advertisement is the effort of a special interest group called “Ohioans for Financial Freedom,” which needs 241,365 valid signatures to put an issue on the November ballot that would negate either all or a portion of the referendum.
There is also another similar advertisement airing which makes the point of “financial choice,” stressing an individual’s right to pay $15 for a two-week $100 loan.
According to another special interest group, there is much more to the story.
“The payday loan industry has become little more than legal loan sharks that work  by a model that cannot survive unless people get into a debt trap and come back to them for loans over and over again. They get repeat borrowers and as a result, the typical two-week loan ends up with an interest rate of 391 percent APR. When you have interest rates that high, it hurts many more people than just the borrowers; it puts a strain on everybody,” said Sandy Theis, spokesperson for the Ohio Coalition for Responsible Lending.
Theis calls payday loans “a dangerous product” designed to take advantage of the less-fortunate. She says the state’s actions to address repeat use while retaining payday loans as an option was the right thing to do.
“I think this was a real common-sense solution to a terrible problem in Ohio. People will still be able to borrow money. There are lots of things that government regulates because they’re dangerous. It regulates what we do with our cars, roads and prescription drugs and payday lending is another example,” she said.
Fourth District Representative Matt Huffman agrees payday loans are not the best financial choice one can make, but voted against the referendum. He makes the choice-related argument raised in the television commercials.
“I voted against it because I think, in some instances, it’s a product people want to have available. I don’t see a lot of difference between these loans and what happens with credit cards where people get a $5,000 line of credit and pretty soon, they’re maxed out and at 19 percent, can never pay it back. Let’s be clear: this is a bad option but it may, at times, be folks’ only option. If they need to make a child support payment or they have a medical bill or some doctor says you have to have $150 up front before he’ll see you. There are different cases where this is appropriate and most people pay it back on payday,” he said.
Other media reports have recently highlighted controversy over the practices used by those gathering signatures. Some have accused those involved of lying and even paying homeless persons to sign the petition. While authorities sort through the issue, the Ohio Ballot Board is working on language for November that will not inform voters of the 391 percent interest rate. Huffman says this was the right course of action.
“It’s misleading to say it’s at a 391 percent interest rate. It’s similar to going to an ATM at a bank other than your own to take out $100 and they charge you $2. Well, that’s one day’s worth of interest and you can say that’s extremely high but it’s really just a question of what somebody is willing to pay for a service. That’s why it’s confusing to say it’s 391 percent and that’s only one example. That’s why they had to take that out of the ballot language”, Huffman said.
“The people who want to keep this in business make a lot of money and don’t want it to sound so bad. This is a really bad financial product. It’s a bad thing for people to do but it’s a lot worse to pay $4 for a .12 ounce drink at the movie theater when you can buy it for $.35 wholesale, for example. The state rips people off more with the lottery than payday lenders do with these loans.”
Aside from opposing sides telling voters “half-truths,” Huffman says it is always up to voters to do their homework.
“Anybody can claim to have a deal that will knock your socks off. It’s up to voters to educate themselves; people often think because they see something on television, it must be true. Well, not really,” Huffman said.

10 Reader Responses to “Payday lending controversy hits the airwaves”

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  1. #1 — Added 2 months, 3 weeks ago

    I think that we could come up with a compromise on the payday lending issue. My main issue is the two week pay back. The interest is not the only problem. Having to pay it back in two weeks is the real problem. Most people in a jam cannot pay back a few hundred dollars in two weeks. How does the rest of the law relate to this time frame? If just section three regarding interest rates is mentioned in the appeal, where does the rest of the new law come into play? Can someone answer that for me?

    Posted on August 26, 2008 at 3:21 am by janet jones

  2. #2 — Added 2 months, 3 weeks ago

    I think that we need to come to some compromise with the payday lenders. They should have some rules to abide by. They should have more reasonable pay schedules and time lengths. The two week deadline is not feasible for most people. That is my main issue-more than the interest rate.

    Posted on August 26, 2008 at 5:58 am by janet jones

  3. #3 — Added 2 months, 3 weeks ago

    It isn’t misleading to let voters & borrowers know that they are being charged 391% APR, in fact, Federal law (the Truth in Lending Act) requires that the APR disclosed so that borrowers can make an apples to apples comparison to other loan products. Payday loans are a defective product that by design has to trap people in debt to be profitable. That’s a bad business model!

    We need to end the debt trap for hundreds of thousands of Ohioans! VOTE YES ON ISSUE 5!

    http://www.youtube.com/watch?v=zDoeXujagE4

    Posted on August 26, 2008 at 10:21 am by Daniel

  4. #4 — Added 2 months, 3 weeks ago

    I have a real problem with the Payday loan lenders. I have fallen victim to them. A few times. Its really hard when your in a bind and you need the money. But yes they are sharks when i comes to wanting their money back. I have had to change bank accounts because of them.

    I agree with the change in the laws that cap the interst rate. I am for that. They can be in business but they need to change their tactics. I think its funny and a shane that the commercial that is referenced is coming from a “farmer”. That is terrible.

    They need to be better regulated though.

    Thanks

    Posted on August 26, 2008 at 10:47 am by Todd

  5. #5 — Added 2 months, 3 weeks ago

    It’s time that people who have no idea of other peoples situation stop trying to protect them from themselves. A person who has never had 5 NFS’s in a month can’t possible understand the consequences of the situation and in their attempt to protect, they only make things worse. Grown adults understand their cash flow needs and how to spend the least amount each month. The more choices people have the better solutions they can find. Certain solution might not make sense for people with perfect credit that have never bounced a check, but it is by far the best choice for many other people. Is it better for a person to pay over $100 in bounce checks, NSF and overdraft protect fees or is it better to pay $15 to $30 for a payday loan? At some point common sense has to kick in here.

    Posted on August 26, 2008 at 12:42 pm by Jim Vierling

  6. #6 — Added 2 months, 3 weeks ago

    The Legislature’s banning payday loans makes about as much sense as banning McDonald’s. Just because some people abuse the product and get too much of a good thing is no reason to deprive everyone else.

    Posted on August 26, 2008 at 4:28 pm by junior

  7. #7 — Added 2 months, 3 weeks ago

    Come on Ohioans. These are not good loans. They do not require a lot of background to see if you can even pay it back. They want your last two paychecks. So what. That does not mean ability to pay. They don’t look at your other bills and other places you may have loans. They are just looking to get you hooked. People have to keep re-borrowing and never get to the principal being paid off. They just keep paying interest every two weeks. Then if they can’t do it one week, they deposit your check and hope to get it all at once that way. Well, if you did not come in to pay on it on time, chances are you did not have it. Now you are faced with overdraft fees. Then they charge you fees. Now you owe interest, late fees, etc. just for a few hundred bucks. Not to mention they will hound you day and night-you and your friends and family. Then they threaten you. It is an awful loan. It is the mob.

    Posted on August 26, 2008 at 5:50 pm by janet jones

  8. #8 — Added 2 months, 3 weeks ago

    I have never gotten a payday loan nor do I plan on doing so. But I do think it is an indivual choice weather a person has a right to get one, not the State.

    The State of Ohio should spend more of its time on getting more jobs in Ohio and not worry about how we choose to borrow money. Then maybe no one would need the services of the payday loan industry if good jobs would return to “all” of Ohio.

    L. G. Tiffin-Ohio

    Posted on August 26, 2008 at 10:10 pm by Lou Gaietto

  9. #9 — Added 2 months, 3 weeks ago

    First, I want to start by saying that I myself have used payday loans in the past, and yes, it was MY CHOICE. These companies don’t come to your house and force you to borrow money, they are there when YOU go into THEIR office and ASK to BORROW their money. The reason that most of these are due back in 2 weeks is that most of the people that use these are paid every 2 weeks. That’s why they are called PAYDAY LOANS. And as far as having to close your bank account because of “these places”, if you had paid back your LOAN as you had promised when you signed the legally binding documents, then you would have had no problem with your bank account, (assuming you went to a payday lender). Also, if you think that a business can operate on the amount of interest that would be allowed with this new legislation, than obviously you haven’t done your research. This small amount would not even be enough to pay the employees, let alone rent, utilities, supplies, etc. Maybe the banks should start having to charge this amount when it comes to NSF fees and other miscellaneous charges. This is my opinon and I know that many people disagree, but that’s why taking this option away is not the right thing to do, it’s called FREEDOM OF CHOICE.

    THANK YOU FOR LISTENING

    Posted on August 26, 2008 at 10:42 pm by Tina

  10. #10 — Added 2 months, 3 weeks ago

    Payday lending is by its very nature a defective product. It is designed to trap people in a cycle of debt. Designed to trap people! It’s no accident. That is why reasonable limits on the interest rates payday lenders can charge is a good thing! 391% is too high! 28% is much more reasonable.

    Vote yes on issue 5! We need lower interest rates!

    Posted on August 27, 2008 at 10:47 am by Tom