An Article In My Local Newspaper Re: Payday Lenders

State legislators debate payday lending regulations: OHIO — State lawmakers are seeking ways to change the way payday lenders do business in Ohio. One Mount Vernon resident who relies on the short-term loans said she opposes any kind of new regulations that would drive the ever-growing payday loan industry out of the state.
Dorothy Pinkerton said she goes to Urgent Cash, a local payday lender, just about every month and borrows about $350. Around the third or fourth of the following month, she pays back about $400, which includes payment for the fees.
“I try to measure out what I will need for the next month,” Pinkerton said. “It sure gets me through the rest of the month. I run out of money before the last week of the month.”
Pinkerton, a senior citizen on a fixed income, said she always pays the loan back and has never had any problems.
But many who use the service cannot or do not pay back the loans, which lands them in court. The interest rate is at the heart of the payday lending controversy in the statehouse, and proposed legislation that would cap that interest rate at 36 percent.
Payday lending advocates argue that such a cap would drive companies out of business, while critics characterize payday lenders as predatory and push for tighter regulations. The industry has grown considerably in the last 10 years in Ohio, and there are about 1,600 of them in the state. Knox County has 10 payday lenders, none of which existed 10 years ago.
The fee payday lenders charge in Ohio is about $15 per $100 for a two-week loan. That works out to be a current annual interest rate of 391 percent, though payday lender advocates say this interest rate is misleading because the loans are meant to be paid back within a short period of time. The maximum loan amount is $800. The borrower writes a postdated check; the lender holds the check until the borrower effectively buys it back. Borrowers can renew the check for another two weeks, and it is this “loan flipping” that draws much fire from industry critics who say payday lenders lead borrowers into an endless cycle of revolving debt. If the borrower does not buy back the check, then the lender can cash the check. If the check bounces, the borrower will find himself in court and subject to the amount of the loan, interest and bounced check fees.
In recent months, three different payday lending bills have been discussed and debated in the House Financial Institutions Committee. Committee chairman Rep. Christopher Widener recently proposed revised legislation that draws from previous proposals: It allows borrowers to extend any two-week loan by at least 60 days but does not put a cap on the interest rate. Widener’s bill would limit borrowers to two payday loans at any given time and limits the total amount to $500 and force borrowers who take out three loans in 90 days to take a financial literary class.
Widener says his goal is to make payday loans available to those who need them but to end the cycle of debt into which many borrowers fall.
This new proposed legislation does not go far enough, according to Bill Faith, the head of the Ohio Coalition for Responsible Lending, who argues for the 36 percent rate cap.
On Friday, Gov. Ted Strickland threw his support in favor of the 36 percent interest-rate cap in a letter to the Ohio Coalition for Responsible Lending in which he expressed concern over the problems caused by the “unfortunate practices” of some payday lenders in the state.
Payday lending advocates say the 36 percent interest rate cap would effectively drive the industry out of business in Ohio and eliminate thousands of jobs. They argue that they provide a much needed service to those who need help to make it from paycheck to paycheck.
As for Pinkerton, she says she doesn’t like paying the fees but she doesn’t think payday lenders hurt anybody. She said the people who take the loans out have to be responsible and need to make sure they can pay them back.