Payday lending reform needs more reform
When a majority of Ohio voters agree to change state law for the public good, we’d like to think their wishes would be respected.
Our investigation of the payday lending industry published Dec. 18 shows that’s been far from the case.
Voters agreed to a law in 2008 restricting payday lenders from charging exorbitant interest rates on their two-week loans, often for $500. As was well documented back then, many borrowers could not repay their debts on time, leading them to seek additional payday loans and digging a steeper financial hole.
But the law failed miserably because the payday lending businesses began charging check-cashing fees of 6 to 10 percent, recouping their lost interest profits on the loans themselves.
The Ohio Department of Commerce has been unable to stop the simultaneous loan granting and check-cashing practice because there’s no specific prohibition against it in Ohio law, nor is check cashing required. Of course, the poor often lack both bank accounts and more transportation to find another place to cash checks.
Ohio normally allows check-cashing fees because firms have some exposure should a check bounce. That’s not the case when a payday lender essentially cashes its own check. Such a service should be free.
There’s no denying payday lenders fill a need in our communities. Plenty of people need quick cash to get their car repaired in time for work. Not everyone has credit cards, nor should they.
But that doesn’t mean companies should enrich themselves by exploiting those most in need.
Even worse, Ohio lawmakers have had two chances to correct this issue but apparently have been persuaded to ignore it by the 15 registered lobbyists in Columbus funded by payday lenders. The payday industry also has contributed $310,000 — likely originating from the poorest among us — to state lawmakers, mostly Republicans.
That’s more than ample evidence that payday lenders will do anything to exploit Ohio’s poor and line their own pockets.
It should be more than enough evidence to convince lawmakers to protect their constituents.
Article source: http://www.chillicothegazette.com/article/20111228/OPINION04/112280312/Payday-lending-reform-needs-more-reform
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