Strickland signs Ohio Bill

Thanks Ryan I had not seen this today!

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

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.

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

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."

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

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.

I was thinking the same thing, Goudah. :?:

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.

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

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...

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.

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

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.

COLUMBUS, OHIO (AP) -- Gov. Ted Strickland has signed a bill that puts new restrictions on the payday lending industry.

The law signed Monday limits borrowers to four short-term loans a year and caps annual interest rates at 28 percent. The state Legislature passed the bill last month over the objections of industry leaders.

Payday lenders had charged about $15 for every $100 borrowed on a two-week loan, which worked out to an annual interest rate of 391 percent.

Industry leaders argue that the law will force them to close offices and lay off workers.

Strickland, a Democrat, and Republican lawmakers say the loans have trapped customers in a cycle of debt.

Lenders- You feel the debt for a change. How does this feel? Hurts you???
These lenders have ripped us off more than enough. They really do cause us to go into debt even more. It sure has us. Once you borrow, you have to keep on everytime. Causing you to always be borrow every week or two. It never ends at all. Just glad that they made this law go thru. I bet the lenders are not happy, especially when they have customers borrowing every 2 weeks like we were for over a year. All it takes is just one time borrowing to fall in thw whole. What are they going to do now that they cant let someone borrow every 2 weeks, and they can only let the person borrow up to 4 times a year? I bet alot of them go out of business. Which some of them should. Charging us 300 and some percent when it now is only going to be 28 percent. Now it is their turn to feel how debt feels. It is about time!!!

???????? Tammy c, toledo

bye bye loans
lets see who is the first to pack up and take there loan services elsewhere, banks and other loaning co are just rubbing there hands together and practicing the key word 'denied' payday loans were not ment to be a way out of debt and people were advised not to use it for that reason but to use the service responsibly those who abused the service did it to themselves it was all in black and white and they signed for it.

???????? jerry H, temperance


this was from a local toledo news site. followed by some comments.....that goodness

In an industry that doesn't run credit checks, there is a very high rate of default -- people that take the money and run.

Part of the reason PDLs always charged a lot of interest, is because they need to make enough money off the ones that DO pay to cover their losses on the ones that DON'T pay.

The companies that stick around to charge 28% interest -- I think you will find them being a lot more selective in who they give loans to, and they will probably start running credit checks.

I kind of figure they will get around this new interest rate somehow, probably by charging fees of some type, etc. While I think some will go out of business, I don't think they all will.

i work for advance america and i just want to know how you guys see that this is okay? i mean, 28 percent on a loan wont cover the electricity to operate the building, much less the rent on a building, not even close to paying minimum wage to the poor sap processing the loan. the payday loans are not meant to be for a year long. it is a two week loan. $15 per $100. the apr on a bounced check fee is over 800%, but the banks reasoning is "you cant have a bounced check fee out for a year" - the same reasoning also is for a payday loan. and you shouldn't have more than one payday loan out anyways, at least in arizona. we ask several times before, during, and after the customer finishes the loan process if they have another out. if they say yes, they cannot get a loan with us, we KNOW this will put them in this kind of a financial difficulty. (trust me, i've been on the other side of the counter too.) what about these employees from Ohio that are now out of jobs and into the ever-growing unemployment line? from what i understand advance america ALONE employed a good 2500 people in OH, not to mention what the other places, like Check Into Cash did. what about all the consumers that DEPENDED on these and USED these loans RESPONSIBLY? where can they go now? can they walk into their bank and say, "hey bank bum me $100 bucks i'll just let you take it from my account on the x payday. k thanks." (do it, see what they tell you.)

we are looking at a defeat on the sunset laws here in AZ, and trust me, as a single mom of two, i know i will be happy to see these places thriving. I like to know that if i need to borrow 100 bucks for food i can do that and just pay them off on my pay day.

how has things been going for the economy in OH? i'm just curious now.