Wednesday, May 14, 2008

"Protect financial choice – keep payday loans"

OK - anyone who knows me or has read my blog even a little bit - knows these words will never EVER come out of my mouth.

That's why I was so thrown off when I saw that uttered out of a respectable looking actors mouth the other day while watching late night TV.

The actor then directed me to the website:

Which is nothing but unbiased propaganda from the payday loan industry in Ohio begging the ignorant to keep payday loans here in Ohio.

Recently legislators in my home state of Ohio have enacted legislation to get this - reduce the APR on payday loans from an average of right around 399% a year, to about 30% maximum. I was so delighted when I first heard this.

Of course the greedy payday loan industry advocates - some of which are run by the big banks have just started a wonderful ad campaign aimed at tricking Ohioans into thinking a year-long loan for $1000 which would end up costing the borrower about $4000 a year - could ever be a good idea.

Here's an excerpt from their informative site:

"Payday loan customers are smarter than most people give them credit for. For many people, payday loans are the right option for borrowing money. Consider the alternatives. Fees for bouncing a $100 check can cost more than 4 times a payday loan. The cost of getting a $100 cash advance on a credit card can be more than 2 times the cost of a payday loan.

  • $100 bounced check with $54 NSF/merchant fees = 1,409% APR
  • $100 credit card balance with a $37 late fee = 965% APR
  • $100 utility bill with $46 late/reconnect fees = 1,203% APR"
What they fail to mention is cost of a more likely payday loan of $600 - $800:

    • $800 bounced check - still has a $54 NSF if bounced once (not the $432 implied)
    • $800 credit card balance - still has a $37 late fee, if late once (not the $296 implied)
    • $800 utility bill - well no one gets $800 utility bills unless you own a mansion or a business and in either case if you have a late/reconnect bill you might want to rethink some life choices.
    • They also compare these likely, monthly bills, to a bi-weekly merry-go-round where no one is laughing but the payday loan shark.
    • Just for comparison's sake - an $800 loan for one month (renewed twice) will cost the borrower about $240 in charges - take that calculation over a year, without adding additional charges and fees, and it comes to $2,880 in charges alone!

They've also played off the fact that 6,000 people will lose their jobs but, I say if they make their living peddling usury then so be it!

Shame on you payday loan sharks - shame on you! If anyone is in Ohio and pondering whether they should vote to keep or get rid of a 400% interest rate - you better believe my opinion is to get rid of it!


Noel said...

Payday loans have helped me in the past when I needed some last minute cash. Getting the loan was fast and easy, and there was no credit check.

Krystal said...

Payday loans
are great for those immeadiate and sudden unexpected expenses that can come up in between paydays. Payday loans are quick, easy, and more affordable than the late fees and overdraft fees that can occur.

mitch said...

Hey, I enjoyed your blog. Very informative. I agree completely. Keep up the good work. I think Payday Loans can be very helpful at times. Especially in those tight situations!

Reggie said...

Thank you all for reading my blog but, guessing by your responses I suspect that you may be financially affiliated with the payday loans industry. It's really sad that you seem to have no problem with exorbitant amounts of excessive interest.

Julie From Ohio said...

Just wondering if anyone ever bothers to think about personal responsibility anymore?

The people that don't use payday loans as they are intended trap themselves. No one forces them into it but apparently the state of Ohio doesn't think we should handle our own money.

Reggie said...

Julie I agree - people should have personal responsibility but, for some people - especially those with low incomes regular checking accounts are not always available to them. Thus payday loans are the last resort for those if an emergency does come up unexpectedly.

What I don't agree with is the fact that those companies need to enforce usury in order to keep other citizens under mounting debt. They then promote these usurious loans by explaining the charge as $15 per $100 ever 2 weeks and not the approximate $240 the person will be charge if they take out a more likely loan amount of $800 every 2 weeks.

I think just saying 'too bad, so sad' to people on the fringes only creates more problems for taxpayers through increased crime, welfare and social services strain.

Anonymous said...

Wouldn't 15 for every 100 every 2 weeks be 120 for 800 every 2 weeks?