Tuesday, October 21, 2008

Stop Toxic Payday Lending Interest Rates


By Bill Faith

Ohio partisans have set aside their usual election-year differences and have joined together to urge a “yes’’ vote on Issue 5. Gov. Ted Strickland, a Democrat, agrees with Republican legislative leaders on this one. The two major party contenders for Ohio attorney general are also in agreement.

Issue 5 asks voters to accept or reject Ohio’s new law that caps interest rates on payday loans at 28 percent annually, down from 391 percent APR allowed under the old law. Ohio lawmakers approved the 28 percent interest rate cap after a year-long legislative debate. Ohio legislators authorized payday lending in 1995. By 2007, Ohio had nearly 1,600 payday storefronts -- and payday lenders had more than 300,000 Ohio customers trapped in a cycle of debt, contributing to everything from a rise in demand for food pantries to an increase in home mortgage foreclosures.

While it’s easy for some to blame the victim, our legislators rightly concluded that the problem with payday loans is their flawed design. They are very easy to get but very hard to repay.

Payday lenders’ internal documents show they target “single-parent households with multiple children’’ who are “financially stressed’’ or people who are on fixed incomes. Ex-payday employees said they were routinely dispatched to Laundromats, low-income apartment complexes and senior citizen centers to round up customers.

Even the men and woman who serve our country have been among the lenders’ prime targets. After the Pentagon reported that the predatory practices of payday lenders were hurting military families and undermining morale, Congress stepped in and capped the annual interest rates for loans to military borrowers at 36 percent.

Payday lenders insist that Ohio’s new interest rate cap law will force them out of business and leave those who need quick cash no other options. They are wrong. Many credit unions offer short-term loans at just 17 percent interest, and more than two-thirds of Ohio’s existing payday lenders have applied for state licenses to offer different types of loans.

Ohio’s new law also calls for a non-public state database to track loans and ensure that lenders are complying with a provision that limits the number of loans a borrower can take out to four each year. It is this provision that is the subject of the lenders’ “Big Brother’’ TV ad.

This is the most insulting ad so far. The lenders did not object to the database when it was added to the legislation, nor did they attempt to include it in the portion of the law they now seek to overturn. If it is truly Orwellian, why not try and overturn it?

The answer is simple: For the lenders, this is not, and never has been, about customers. It’s about greed.

Throughout this campaign, the lenders have been willing to do anything, say anything, or pay anything to get their way.

Citizens who want to get something on the ballot must submit petitions with signatures from more than 240,000 registered voters – and those petitions must contain a summary that accurately and fairly explains the law they seek to overturn. Ohio Attorney General Nancy Rogers twice rejected the lenders’ summaries because they were not “fair and truthful.’’ So they sued her.

When I complained that petition circulators hired by lenders paid residents of a Butler County homeless shelter to sign petitions – a practice banned under Ohio law, they threatened to sue me.

Ohio can’t afford to let this industry win by deceiving voters and bullying critics.

As you prepare to vote, please ask yourself these questions:

Do you think 391 percent interest is too high? Are you annoyed when one special interest parachutes into our state and buys its way onto the ballot? Do our leaders have a right to rid the marketplace of a defective product that’s harmful to Ohio?

If you answered “yes’’ to even one of these questions, please join me in voting “yes” on Issue 5.
Faith is executive director of Coalition on Homelessness and Housing in Ohio and treasurer for Vote Yes on 5 Committee.
Copyright (C) 2008 by the Ohio Forum. 10/08