Ohio Payday Lenders are Much Worse than Tony Soprano
Ohio Coalition for Responsible Lending released a study yesterday which exposed the practice of payday lending yesterday. They want to lower payday loan interest from 391% to 36%. My question is where were the politicians as this plagued the state? Didn't they drive through neighborhoods like Cleveland and think to themselves "why is there a payday loan place popping up on every street corner". I think we all knew. They were making a lot of money. 391% on any investment seems like a pretty good deal to me.
Here is one example that they put on their website:
Payday lenders market their loans as short-term help for people in crisis. Data revealed, however, that only 1% of payday borrowers pay off their original loan in the standard two-week cycle. In fact, loans are deliberately structured to require borrowers to continue the cycle. For example, Judy, a recently divorced mother of two, took out a $300 loan that cost $45 in fees every two weeks. This became a $690 monthly payment which took nearly two years to finally pay off. This practice is the very foundation of the payday lending business model.
And I thought Tony Soprano was bad. Ohio doesn't even make payday loan businesses file detailed activity reports so who knows what other kind of funny business these companies are up to.
The coalition, a bipartisan group, is trying to get these companies to follow the rules of SB 185, the Homebuyers Protection Act which protects against borrowers from predatory lending. Isn't it time for these people to be stopped? Lets hope the legislature is listening.
Comments
I'm grateful for your attention to this issue and trust that you will pursue the truth.
Much has been publicized, negatively, about the Payday Loan product which, I find to be a Godsend for the vast majority of Americans that live paycheck to paycheck. The reality is that many legislators and consumer groups have not taken the time to analyze the benefits of this financial product. Instead, their propaganda relies on a handful of disgruntled customers who are habitual abusers of any and all credit products - individuals that feed off the system and, ultimately, claim 'foul' to avoid repayment of their obligation.
Interestingly, the Coalition for Responsible Lending (CRL) is a consumer advocacy group that is, by the way, a wholly-owned subsidiary of the Self-Help Credit Union. This so-called Self-Help Credit Union earns 18 cents in net income for every dollar of revenue. In contrast, five of the publicly traded payday loan companies earn an average of 7 cents in net income for every dollar of revenue. So just who is "making a lot of money" and which one really sounds like a “pretty good deal” to you?
Not only that, but payday lenders also earn far less in profits than the nation’s major banks overall. The average profit margin of the top ten banks is 26.52% compared to the 6.6% profit earned by the five publicly traded payday lenders. Once again, just who is really “making a lot of money”?
Suffice to say —like many industry critics— it’s easier to sling mud than to understand the issue.
15 July 2006
59 min 45 sec
Well, I guess the person I saw speaking about Payday Lending from the Federal Reserve Bank was lying when they said how bad it is for a consumer to take a loan out like a payday loan. And to knock Credit Unions, come on! Those are one of the best deals for consumers offering LOW INTEREST LOANS to their consumers.
Eugmc, even after Craig gives solid, verifiable statistics about payday industry earnings vs. credit unions and banks, you STILL don't get it. That's part of the reason why this issue is so misunderstood: emotion trumps reason, and the discussion goes nowhere. Why don't you do some real research and learn the facts before you try to confuse others with your propaganda?
Let me tell you something alright? Leading up to the time that we had to take out a cash loan, we didn't see anything but negative remarks from others online about the cash loan industry. We ended up almost losing our car because we waited. At the last minute, we borrowed $400 from cashloancity.com and I really believe it is the only thing "at the time" that saved us. I understand that there's a problem with some people abusing this industry and crying about it later, but what about the people that really need it and pay it back on time? We're even getting ready to have a positive mark on our credit because of it. Why are the people that never need this type of loan the same people that keep others from being able to get one?