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Posted: Mon Jun 02, 2008 9:40 am Subject: Strickland signs Ohio Bill

Gov Strickland from the State of Ohio has signed the payday lending bill. This means the new rates go into effect in 90 days. More information about this, look in the payday loan news.

Highlight of this bill is internet leading will not be allowed in 90 days.

Posted: Mon Jun 02, 2008 6:38 pm Subject:

Thanks Ryan I had not seen this today!

Posted: Mon Jun 02, 2008 6:59 pm Subject:

Ryan, did you read the write up in the dispatch? Amazing the part about checksmart huh????

Posted: Tue Jun 03, 2008 5:53 am Subject:

Wow I just read the Dispatch article. Checksmart was the one company I wondered about. They were probably one of the most difficult payday lenders to deal with when you defauted on loans and tried to make arrangements. I guess they are on their way out too.

Posted: Tue Jun 03, 2008 6:25 am Subject:

Yes, just how does a CEO founder get "let go"

Posted: Tue Jun 03, 2008 7:45 am Subject:

Here is the article from the Columbus Dispatch....

"Strickland signs payday-lending bill
Tuesday, June 3, 2008 4:59 AM
By Jim Siegel

THE COLUMBUS DISPATCH
To learn more
See a comparison between Ohio's existing Small Loan Act and the newly signed Short Term Loan Act. (PDF from the Legislative Service Commission)
Payday status
What's left?
House Bill 545, signed yesterday by Gov. Ted Strickland, will put an end to payday loans as they exist today. However, two short-term loan options remain, if banks, credit unions or nonprofit groups want to offer them:

Short-Term Loan Act
Interest rate/fees: 28 percent, annualized

Loan duration: No less than 31 days

Maximum loan amount: $500

Number of loans to a single borrower: Four per year, one at a time

Underwriting standards: Cannot loan an amount more than 25 percent of the borrower's gross monthly income

Small Loan Act
Interest rate/fees: 28 percent plus a $15 origination fee for loans of $500 or less or $30 for more than $500. Fee can be charged every six months.

Fee on a $300 two-week loan: Approximately $18 ($45 under current law)

Loan duration: No restriction

Maximum loan amount: $5,000

Number of loans to a single borrower: No restriction, except that origination fees cannot be compounded

Underwriting standards: None

Source: Legislative Service Commission
Gov. Ted Strickland yesterday signed tough new restrictions on short-term lending in Ohio that supporters say will put an end to a payday loan industry that does far more harm than good for Ohioans in financial trouble.

When the law takes effect in 90 days, it will put an end to the payday lending industry as it exists in Ohio, likely pushing many of Ohio's 1,600 payday stores out of business. No longer will lenders be able to offer two-week loans with a 391 percent annualized interest rate ($15 per $100 on a two-week loan).

Strickland said the bill shows that “We will not tolerate individuals being exposed to exorbitant rates, which does contribute to this cycle of indebtedness.”

National Check Cashers and Always Payday companies said they expect to close their stores in August. Check into Cash, Cash America International and Advance America also have said they expect to close, each arguing it cannot continue to operate under the 28 percent interest rate imposed by the new law.

Asked to comment, Lisa Ferguson, director of communications for Dublin-based Checksmart, declined because yesterday was her last day of work. She said she and her staff had been let go as a result of the bill.

Checksmart's top executives, company founder and CEO James Frauenberg and his son, Jamie Frauenberg, who also served as president of the Ohio Association of Financial Service Centers, were let go shortly after the Senate passed the bill last month, she said.

“In passing this legislation, Ohio's elected officials chose to turn their backs on their constituents and play politics,” said D. Lynn DeVault, president of the Community Financial Services Association of America, a national payday advocacy group.

“It is a sad day when the opinions of editorial writers and so-called consumer groups count for more than the opinions of the people responsible for putting lawmakers in office.”

Strickland's signature marks a major victory for the Ohio Coalition for Responsible Lending, which successfully argued that the payday lending model is inherently flawed, trapping too many borrowers in a cycle of debt where they repeatedly need new loans to pay for old ones.

That argument trumped the case from payday lenders, who said their products helped people with short-term troubles and was a less-expensive option than bounced checks or late fees.

“We have landmark legislation that is historic and is the best consumer law of its type in the nation,” said Tom Allio, a leader of the coalition. Of the payday lending industry closing down in Ohio, he said, “They have only themselves to blame, because throughout the last nine months they could have changed their business model, but they refused to do it.”

Rep. Christopher R. Widener, R-Springfield, the bill's sponsor, said payday lenders were likely helping most people when they issued them the first loan. But statistics and testimony showed that one loan too often turned into many, with the average borrower taking out 10 to 13 per year.

The legislature enacted a carve-out in 1995 that created the payday industry, which grew from 107 stores in 1996 to more than 1,600 this year — more than the number of McDonald's, Wendy's and Burger Kings in the state combined. The industry said that roughly 6,000 Ohioans would lose their jobs as a result of the bill.

“But let's be honest about economic development,” said House Speaker Jon Husted, R-Kettering. “ There are jobs that are value-added and jobs that aren't value-added. You have to weigh out what the net cost is. There were a lot of jobs in the mortgage industry a while ago. Look what it did to a lot of our neighborhoods in this state.”

Senate President Bill M. Harris, R-Ashland, added: “We want to replace the job that's taking advantage of people with jobs that are helping people.”

Harris also said he doesn't think those jobs have to be lost. He said companies can continue to offer less-expensive short-term loans under Ohio's Small Loan Act.

“Where people want to stay in business and help those who are less fortunate, they can do that,” he said. “Those who want to make a huge profit and not worry about the people that are prone to borrow from payday to payday, they just won't be in business anymore.”

The bill creates a new Short Term Loan Act that, in addition to a 28 percent rate cap, it limits borrowers to four loans per year, requires that loan terms last at least 31 days, and bans Internet payday lending.

If lenders try to continuing offering short-term loans, they are more likely to use the state's existing Small Loan Act, which does not specify a loan duration and allows a 28 percent rate plus a $15 origination fee for loans of $500 or less.

Widener said he hopes traditional lenders and nonprofit groups will fill the void left by the absence of payday lenders.

A more tightly written law in 1995 would have avoided the problems that led to House Bill 545, Widener said.

“What was essentially missing from this carve-out in 1995 was the underwriting criteria, the sensibleness that came with what did somebody have the ability to repay,” he said.

Strickland also was joined at the bill signing by Senate Minority Leader Ray Miller, D-Columbus, who has been pushing for payday lending reforms for years,

Wall Street has battered the two publicly traded payday companies with the largest presence in Ohio — Cash America and Advance America.

Cash America's stock is down about 21 percent since April 29, the day before the Ohio House passed the payday bill that was signed today. Advance America's stock has fallen even further, dropping about 29 percent since April 29. That company last week also lost a court battle in Pennsylvania, where the Supreme Court ruled that its loans were violating state consumer law.

The pendulum began to swing against payday lenders in fall 2006, when Congress passed a bill capping lending rates to military families at 36 percent, after the Department of Defense issued a report that payday lending hurt troop readiness and morale.

Twelve states plus the District of Columbia prohibit loans that charge triple-digit annual percentage rates. This list includes Pennsylvania, West Virginia and New York, along with states that more recently acted to push out the payday industry, including Georgia, North Carolina and Oregon.

Payday operators are fighting an Arizona law that, unless it's overturned by voters, will shut them down in 2010."

Posted: Tue Jun 03, 2008 7:47 am Subject:

Thanks Sassy,I thought about posting it, but I wasn't sure what the rule on posting something like that was:) I didn't want to get into trouble:) Reny

Posted: Tue Jun 03, 2008 7:52 am Subject:

See - This is what I don't get.

So the company could still lend you $300. They could charge you 28% interest, and a $15 origination fee.

You can't rollover the loan, so in 31 days they could still make $7.13 in interest, and the $15 origination fee. That is still $22.13 on a $300 loan.

Oregon did the same thing, they let the places charge an origination fee. Most of the big guys closed, but a bunch of the little guys are still around. They can still charge almost $10 per $100.

Posted: Tue Jun 03, 2008 7:59 am Subject:

I was thinking the same thing, Goudah. Question

Posted: Tue Jun 03, 2008 8:03 am Subject:

Yeah, that isn't that much less, really, considering now they make $45 on a $300 loan. The biggest thing is that it is due in 31 days and not 15, I think.

Posted: Tue Jun 03, 2008 8:04 am Subject:

That's how Oregon's law is . . . . 31 days in the minimum loan term.

Posted: Tue Jun 03, 2008 8:05 am Subject:

That's just what I was thinking, they can't have folks getting new loans every 2 weeks, plus you can only get 4 loans a year...

Posted: Tue Jun 03, 2008 8:08 am Subject:

With the min loan term being 31 days, you have to consider that the actual loan term would be more then that, because no one's payday would fall exactly 31 days after the loan is taken out. So the average loan term would actually be around 45 days. So you could still be in payday loan debt a substantial part of the year.

Posted: Tue Jun 03, 2008 8:10 am Subject:

Good point Goudah, I hadn't thought of that.

Posted: Tue Jun 03, 2008 9:07 am Subject:

I'm thinking the fact that people can't get loans every 2 weeks would substantially cut their profits. That's why they say they can't survive because the new law does keep them from making huge profits off people who can't make ends meet.

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Strickland signs Ohio Bill

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