Columbus, OH – June 3, 2009 – (RealEstateRama) – Flanked by those who would limit consumer credit choice, Rep. Matt Lundy (D-Elyria) today unveiled a bill designed to push lenders operating legallyunder Ohio law out of business, killing as many as 5,000 jobs.
Lundy brings his bill forward one year to the day after Governor Ted Strickland signed the Short Term Loan Act, legislation that capped interest rates at 28 percent APR, forcing lenders to operate under other statutes in order to stay in business.
“Rep. Lundy’s grandstanding will only force consumers to more expensive choices, such as bouncing checks. It is an egregious example of government paternalism,” said Lawrence Meyers, a consumer choice advocate.
Since November, only 19 of the 1,000+ storefronts statewide licensed themselves under the Short Term Loan Act. The rest opted for licensure under Ohio’s Mortgage Loan Act and Small Loan Act. Both statutes were chosen by payday loan companies in order to provide short-term credit to those in need. An estimated 154 million such transactions were undertaken in the U.S. in 2008, saving consumers $4.15 billion in overdraft fees alone. Under these statutes, payday lenders are permitted an origination fee of $15, a credit investigation fee of $10, and 24% APR. In total, this represents a 53% revenue cut from the statute they previously operated under. In order to stay in business and provide this important lifeline to consumers, lenders legally provide the loan proceeds in the form of a check, and offer to cash it for a fee, but only if the customer wishes to do so.
“Bill Faith seeks to augment his own organization’s importance by forcing more people to rely on it, instead of short-term consumer loans that they have used with great success for years,” Meyers said, “The number of complaints the state has received regarding loans, under the old statutes or the new ones, are miniscule. This is nothing more than a power grab by a stooge of the Center for Responsible Lending, and grandstanding by a demagogue.”
Faith has repeatedly charged that these loans trap customers in debt, despite the fact that the SEC filings of every payday lender in Ohio demonstrate that 94% of the loans are repaid on time.
Meyers believes the bill has little hope of passage. “We’re late in the session, and the original bill was the result of political payback by Republican leaders against a Democratic colleague whose wife turned out to be a lending lobbyist. It’s all just grand political theatre. Unfortunately, tens of thousands of Ohioans got caught in the middle and opportunists like Faith and Lundy are more interested in sucking the blood from average Americans than they are in doing the right thing – leaving htem alone to make their own choice.”
“Abusive lending is not a partisan issue,” agreed Meyers. “But the vast majority of customers use payday loans responsibly. It’s all right there in the public filings.”