^I understand the necessity of the government to regulate in many instances, but it is very frustrating to me that the government needs to hold peoples financial hands.  Can we start from the bottom by mandating a financial planning class be taught in high school?  FIN 101 - Don't buy what you can't afford.

^I understand the necessity of the government to regulate in many instances, but it is very frustrating to me that the government needs to hold peoples financial hands.  Can we start from the bottom by mandating a financial planning class be taught in high school?  FIN 101 - Don't buy what you can't afford.

 

Yes, financial education is sorely lacking.  Basic stuff, like mortgages & investment instruments, how credit ratings work and what they mean.  It should be mandatory high school curriculum.

 

Unfortunately though, we live in a society where operating on cash flow alone can render you non-competitive.  This is why so many businesses are currently struggling with the lack of short term credit.  If your competitor has access to credit and you don't, or their terms are way better than yours, it may not matter how hard you work or how good your product/service is.  They win.  As to individuals, most cannot afford to pay cash for higher education, but they still need it and they need it early in life.

 

Thus, businesses and individuals cannot be expected to live within their means.  That isn't how our economy works, on a fundamental level.  The question becomes what the terms of financng will be, and how those terms will vary among different borrowers.  The starker the differences in terms, the more the financiers are determining society's winners. 

A lot of times, overdraft fees are forgiven once the customer talks to the bank. And, banks are very receptive to negotiation when you have racked up a larger amount of fees. Try that at the Rob 'N Go. "Ah, can I get a 100% APR instead of 300%?"

 

I noticed that the lender described in the above article is not closing all of its locations, contrary to what the industry representatives stated.

 

 

It is sad that this passed. As a landlord, I have many tenants that use these services to pay their rent every month. I hope this means I do not have to evict people.

I think you have bigger issues to contend with if you are renting out to tenants who depend on those services for rent payments.

 

If you can't afford to live within your means, by all means, depend on a "payday lender" that charges 300% APR. Brilliant.

Ohio payday lenders in flux

http://news.cincinnati.com/article/20081108/BIZ01/811080413/1055/NEWS

 

Tuesday's vote in Ohio reaffirming a 28 percent interest rate cap on payday loans has prompted some operators to leave the state, while others are mulling their options.

 

Payday lenders say the rate limit enacted by the Legislature, signed into law by the governor and approved by voters as Issue 5 is too low for many of them to continue operating in Ohio. The new rate caps the interest for a two-week loan for $100 at about $1.08.

 

Their customary charge of $15 amounted to an annualized rate of about 391 percent.

Banks offer payday loans to customers

http://news.cincinnati.com/article/20081108/BIZ01/811080371/1076/NEWS

 

More traditional banks have begun offering customers advances on their direct deposits for a fee, a practice payday lenders equate with loans they give.

 

But because the banks are mostly regulated by federal authorities, the state law upheld by Ohio voters on Tuesday will have no bearing on them.

 

"Clearly they are not being held to the same standard as our industry and will not be," said Kim Norris, a spokeswoman for the Ohioans for Financial Freedom - the campaign group that battled to defeat Issue 5 and repeal the interest rate caps for payday lenders. "It's not a level playing field."

Banks also charge you for cashing a check even if it's drawn from their bank if you don't have an account with them.

Hi All,

 

My first independent post here as an "Ohioan-to-be" and keen supporter of improving urban living. I haven't seen any mention of the interest rate cap placed on Payday lenders in any discussion thread, so I was surprised to learn this change may put them out of business: http://blogs.moneycentral.msn.com/topstocks/archive/2008/11/06/payday-lenders-lose-big-in-election.aspx

Payday lenders are often part of the blight in low-income neighborhoods. While some folks use them as lenders of last resort, the usurious interest rates put an additional strain on limited financial resources. Any other opinions on this change and how it might impact poorer neighborhoods? What better financial alternatives might benefit low income residents?

 

Check 'N Go closing 36 Ohio sites

http://cincinnati.bizjournals.com/cincinnati/stories/2008/11/10/daily30.html

 

CNG Financial, parent of the Check ’n Go payday lending chain, said Tuesday it will close more than half of its Ohio stores over the next several months.

 

Check ’n Go will close 36 of its 71 stores in the state, eliminating up to 75 jobs, according to a news release. The company didn’t specify which sites would be shut down, but a spokesman said closures would be based on lending volume.

 

The Cincinnati-based company has about 12 stores locally.

Such massive job losses that were predicted!

^ Apparently 2.08 people work at each Check 'N Go location.

Check Into Cash closing 32 Ohio stores

http://cincinnati.bizjournals.com/cincinnati/stories/2008/11/17/daily60.html

 

Another payday lender is shutting down some of its Ohio shops in the wake of the industry’s defeat at the polls in the November election.

 

Cleveland, Tenn.-based Check Into Cash said it will close 32 of its 92 Ohio stores within the first two weeks of December, cutting 45 workers.

 

The company’s remaining 60 stores will operate under the Ohio Small Loan Act, which lets lenders charge a $15 origination fee on loans up to $500 and $30 for loans above that amount, in addition to annual interest of 28 percent. President Steve Scoggins in a statement said he wouldn’t rule out additional closings.

Well, this is the first response to the new payday lending regulation from the banking industry that I've seen.  I guess its ok for the banks to legally charge high interest rates!  Way to go informed Ohio voters!!

 

Fifth Third Early AccessFifth Third Early Access is a personal checking account feature that enables you access to a line of credit linked directly to your checking account. Fifth Third Early Access allows you to take an advance on your next qualified direct deposit.

You can enroll today in Internet Banking or at any of our Fifth Third Bank locations. Once enrolled, you can advance funds online from Fifth Third Internet Banking by selecting Fifth Third Early Access on the My Accounts page. You can also advance funds by visiting a participating Fifth Third Bank location or at most Fifth Third ATMs.

Fifth Third Early Access is an expensive form of credit. Fifth Third Early Access should only be used in situations where you need funds quickly and do not have access to less expensive forms of credit or cash.

 

 

How is the Annual Percentage Rate (APR) calculated?

An Annual Percentage Rate (APR) is the cost of funds borrowed over a one-year period. APR is calculated as a percent of the advance amount multiplied by the number of statement cycles within a year. For example:

$50 Advance with a $5 fee = $5/$50 = 10% X 12 Cycles = 120% APR.

We show the Annual Percentage Rate (APR) for Fifth Third Early Access so our customers can compare the cost of using this product against other forms of credit, but there is no interest charge associated with an advance.

 

Holy crap!

It has nothing to do with being an informed ohio voter.  Both practices are outrageous.  And both need regulated.  Only one was put on the ballot in front of me, so that's the one I voted on.

It has nothing to do with being an informed ohio voter.  Both practices are outrageous.  And both need regulated.  Only one was put on the ballot in front of me, so that's the one I voted on.

 

While 120% is high, it's not 300+%.  This has nothing to do with Ohio informed/uninformed voters.  This has everything to do with the STILL unregulated financial market! 

 

We shouldn't have to vote on this sh!t.  Our elected officials are SUPPOSED to be watching out for us!    As laughable as that sounds.

I would still love to see legislation on reform of bank practices for overdrafts and essentially payday loans.

Sorry, but it does show you are uninformed!  It is only a fee, and the fee works out to 120% if the loan extended for a full year.  But, as with the check cashing places, it doesn't.

 

 

 

 

No one said that the payday lending laws would solve all our problems.  We still need to regulate overdraft fees, credit card APRs, etc.  But this is a good start. 120% from Fifth Third is better than 300% from those shady Western Union places.

It has nothing to do with being an informed ohio voter.  Both practices are outrageous.  And both need regulated.  Only one was put on the ballot in front of me, so that's the one I voted on.

 

While 120% is high, it's not 300+%.  This has nothing to do with Ohio informed/uninformed voters.  This has everything to do with the STILL unregulated financial market! 

 

We shouldn't have to vote on this sh!t.  Our elected officials are SUPPOSED to be watching out for us!    As laughable as that sounds.

 

Caveat emptor!!!  Watch out for yourself!  The government is not your personal financial adviser and you should take responsibility for your own actions.  If there is a need for a cash advance and people are willing to pay 120% (or even 500%) APR then who are we to say that they cannot do that?

 

I firmly believe in capitalism and that the market will set a fair price for every commercial good.  We should be working to educate people on financial responsibility so that they are not put into a situation that forces them to take a cash advance at a premium fee.  These people need to be punished for their inability to be financially responsible.  It may be the only way they learn.  Further regulation is not the answer IMO. 

Why can't Western Bowl get a few mil out teh bailoutz?!?

I believe capitalism as we know it is flawed, and this situation shines a light on the main reason.  The cost of capital varies wildly among different classes of people.  The more you already have, the less it costs you to get more.  If you are in the market for a small loan at 120%, you are not founding microsoft today.  Or tomorrow.  The fruits of your labor get diverted to that interest payment instead.  Those same fruits go into the bank account of someone who got their loan at 10% (because they only barely needed the loan in the first place).  This regressive force is what prevents our version of capitalism from becoming the pure meritocracy Alexander Hamilton had in mind.

^Dare I say that's were the big bad government comes in and provides some bridge financing. Of course pure capitalism is the only way the USA can function or it's evil socialism.

Of course someone that has more and makes more money will be able to borrow more... that only makes sense.  We can't be lending a lot of money to people that don't have the means to repay it.  That's what got us into the current financial crisis!  Anyway, it doesn't matter if you have $100 or $10,000 in your bank account you are still paying 120% when you get a cash advance.  It's a service that has a value assessed to it just like anything else.  It's also an avoidable cost.  It is not the job of the US Government to save people from their own stupidity.

 

Just like the smoking ban, which I also disagree with, we should not be able to tell people how to live their lives.

Nobody with 10k in the bank is taking out payday loans, so it makes no difference that they would hypothetically be charged the same interest on one.  That is precisely what I mean.

People with money in the bank have taken out payday loans before.  Maybe the money is locked up in an investment that they can't touch and they have some bills or a large car repair they need to get done immediately so they take out a quick cash advance.  It's a service that people use... not just poor people.

Charging people 120% interest is not a service, any more than washing cars for $1000 apiece would be.  If anybody is buying that car wash, something is wrong and it ain't just them.

THEY ARE NOT BEING CHARGED 120%!!!!  They are only being charged 10%.  It works out to 120%APR if the loan was extended a full year.  But it can't be!!!  That's the whole issue with the notion of payday loans being bad.  They aren't.  Yes, the apr works out to 360% but the loan is only good for 2 weeks.

 

It's sort of like paying a Ticketmaster charge.  Some tickets you can't buy anywhere else, yet they charge you a fee to buy from them.  Say the fee is 10% of the ticket price.  Calculate the APR on that and it is 120%.  But no one will ever pay the 120%, because it is an upfront payment.

THEY ARE NOT BEING CHARGED 120%!!!!   They are only being charged 10%. It works out to 120%APR if the loan was extended a full year. But it can't be!!! That's the whole issue with the notion of payday loans being bad. They aren't. Yes, the apr works out to 360% but the loan is only good for 2 weeks.

 

It's sort of like paying a Ticketmaster charge. Some tickets you can't buy anywhere else, yet they charge you a fee to buy from them. Say the fee is 10% of the ticket price. Calculate the APR on that and it is 120%. But no one will ever pay the 120%, because it is an upfront payment.

 

The Ticketmaster analogy doesn't work because buying a ticket is nothing like a loan.  However, for any transaction that works like a loan (you get something now and pay it back later or over time), it is fair to calculate APR.  Actually, if we calculated EAR (Effective Annual Rate) rather than APR, it would be even higher!

 

As I mentioned earlier in this thread, one business that is even worse than payday lenders is rent-to-own stores.  Consider the fact that many people using RTO stores are doing so because they do not have access to credit cards or store credit to buy those type of items.  It is a loan type of transaction because you get the item now and make weekly payments until the item is officially yours.  We did the math in my Business Finance class, and the EAR worked out to THOUSANDS of percent annually, much higher than payday lenders.

It's sort of like paying a Ticketmaster charge.

 

no

yes, it is a simple charge for services.

 

 

BTW, Walmart will cash your payroll check for only $3!  Does that seem fair?  That works out to 36% APR.

yes, it is a simple charge for services.

 

 

BTW, Walmart will cash your payroll check for only $3!  Does that seem fair?  That works out to 36% APR.

 

Sorry, but that still doesn't work.  You can't just convert any charge into APR unless is vaguely resembles a loan type of transaction... they give you something now and you pay them later.  Once they do this, you can introduce the concept of "time value of money."

 

I get a burrito at Chipotle for $6.75 and I get a guacamole on the side for $1.50 extra.  They're charging me a 22% APR guacamole surcharge!

yes, it is a simple charge for services.

 

 

BTW, Walmart will cash your payroll check for only $3! Does that seem fair? That works out to 36% APR.

 

The 36% APR doesn't make any sense. 

yes, it is a simple charge for services.

 

 

BTW, Walmart will cash your payroll check for only $3!  Does that seem fair?  That works out to 36% APR.

 

Ticket master charges are the dumbest thing ever. A lot of venues don't even charge you for buying tickets at the door. There's multiple fees in each ticket purchase that are unjustifiable. It remind me of "IT fees" "Campus convenience fees" "General fees" etc attached to my tuition at UC. In UCs case it's just a way to charge more for tuition than the state will allow them to.

 

No one should have to pay the majority of bank fees either. It's a privelage for a bank to have a steady stream of deposits from strangers. I got in trouble when I was 18 for over drafting. I had about 8 charges that went through and they were all for coffee and other 1 dollar items but they charged a 35 dollar over draft fee applying to each transaction. That works out to an unGodly APR percentage. I shouldn't have over drafted, I should have balanced my checkbook but the banks could be a little more lenient with people. The number of people who are going to overdraft and do that is calculable for them. Easy profit. It's exploitation of apathetic or desperate people.

Ohio payday lending law needs reworking, critics charge

The Associated Press • February 18, 2009

http://news.cincinnati.com/article/20090218/BIZ/902190304

 

COLUMBUS - Some officials say Ohio's payday loan law needs reworking to close loopholes they say are allowing lenders to continue charging triple-digit interest.

 

Loans that had carried annual interest rates of up to 391 percent were capped at 28 percent under the law passed last year and upheld by voters.

 

But Attorney General Richard Cordray says lenders are taking advantage of Ohio law to offer other products similar to payday loans with fees equivalent to annual interest ranging from 128 to 700 percent.

If no one has ever paid 391% i don't see wha the issues is. I bet you can find furniture dealers charging people more than that for their products.

I don't understand how people are still justifying the payday lenders.  Time value of money is the most basic, fundamental aspect of finance.  People complain when their credit card APR gets upped 5 percentage points, but they don't see a problem with payday lenders, refund anticipation loans, or rent-to-own stores?  People that have credit cards are better off getting a cash advance from their credit card at something like 30% APR.

^People are still standing up for payday lenders because they actually still believe in a free market society.  Yes, they charge a high APR, but people are willing to pay that APR for the service these payday lenders provide!

 

I applaud the payday lenders for finding their way around the ridiculous legislation that was passed in November.  The people that voted to cap interest rates are the people that never use these services.  I never use them either, but I refuse to take that right away from someone else because we think it's what is best for them.  Who do we think we are?

 

This is just another attempt by the government to "save people from themselves".  It gets grouped with the smoking ban and mandatory seat belts.

I applaud them for creative legal work too, but it's wrong.  Nobody is willing to pay this kind of interest, they pay it because they have no other access to financing.  As long as so much of their money goes to the payday lenders, they will not build up savings and they will continue to have no other access to financing.

You're right... there are few other financing options for people looking for an advance, but I don't think this means we should shut down an entire industry because we think we know what's best for the people that are using the service.  Some people (as sad as it may be) rely on these types of services to make their bill payments on time.  They are willing to pay the loan fee to avoid the larger penalties associated with missing bill payments.

 

I understand the argument against payday lenders... they don't do anyone any financial favors, but they do provide a necessary service IMO.  We'll see how it plays out, but I don't think it is right what the government is doing in this case.  The head of Checksmart was accurate in describing this as a "witch hunt".

^People are still standing up for payday lenders because they actually still believe in a free market society.

 

So when these people who CAN'T afford yesterday's ice water owe thousands to these companies and ultimately file for bankruptcy, who is left to pay off their debt?

 

This is just another attempt by the government to "save people from themselves".  It gets grouped with the smoking ban and mandatory seat belts.

 

I guess we are damned if we do/ damned if we don't!  Last I checked WE as voters of the state of Ohio voted to regulate these guys.  Most Ohioans may not use these services, but many feel the same way I feel in that these businesses have been a drain on society AND HAVE contributed to the irresponsible lending practices that are sucking us dry financially. 

 

And personally, I think it's shady as to how fast these places popped up over the past few years.

 

Shut em down!  If you can't get a loan at a bank, chances are YOU DON'T NEED ONE! 

 

We have to start drawing the line somewhere in regards to credit!  I'm still unsure if we will ever be able crawl back out of the hole we are in now. 

 

The next several generations of our kids ARE going to be paying for these other generations who believe they were ENTITLED to easy credit!    It's not right!

^I'll agree with you that payday lenders have contributed to the bad financial habits of a lot of Americans.  I'm not going to lose any sleep over losing these establishments, but I'm worried about the precedent it sets.  "If we the people of the great state of Ohio don't like your business we reserve the right to shut you down."

 

Shut em down! If you can't get a loan at a bank, chances are YOU DON'T NEED ONE!  

 

This just isn't true for a lot of people.  Like I said before, it's either pay the fee for the advance or eat the late payment fees enforced by each utility company, cable company, auto lender, landlord, etc...  In many cases the payday loan fee is the lesser of two evils and without that option some people will be worse off.

 

Banks will be forced (probably by the government) to offer short term loans at or below that 28% APR cap because this service is needed by the community (for reasons cited above).  If your goal is break people of their irresponsible lending habits how does offering them a short term loan with a LOWER interest rate help? 

You're right... there are few other financing options for people looking for an advance, but I don't think this means we should shut down an entire industry because we think we know what's best for the people that are using the service.  Some people (as sad as it may be) rely on these types of services to make their bill payments on time.  They are willing to pay the loan fee to avoid the larger penalties associated with missing bill payments.

 

I understand the argument against payday lenders... they don't do anyone any financial favors, but they do provide a necessary service IMO.  We'll see how it plays out, but I don't think it is right what the government is doing in this case.  The head of Checksmart was accurate in describing this as a "witch hunt".

 

Under that theory, there's no reason to even have cops or laws.  Leave it to the market.  It would make more sense in a country whose prisons weren't filled with drug cases.  Freedom means freedom for everyone, we can't have total freedom for businesses and so little for individuals.  I used to be a libertarian, but in the end I found that philosophy far too accomodating toward evil.  Prohibitions against usury have biblical origins.  No that alone doesn't make payday lenders illegal, but keep in mind that these objections aren't coming out of thin air.  These are widely held moral standards that have existed for thousands of years.  I really don't think free market principles should trump morality, ever.

This just isn't true for a lot of people.  Like I said before, it's either pay the fee for the advance or eat the late payment fees enforced by each utility company, cable company, auto lender, landlord, etc...  In many cases the payday loan fee is the lesser of two evils and without that option some people will be worse off.

 

Banks will be forced (probably by the government) to offer short term loans at or below that 28% APR cap because this service is needed by the community (for reasons cited above).  If your goal is break people of their irresponsible lending habits how does offering them a short term loan with a LOWER interest rate help? 

 

Look, if you are getting loans to pay auto, cable, or other discretionary expenses then get rid of those items.  Nobody NEEDS cable and if you are borrowing to pay your car loan, then maybe you should be reconsidering where you live in relation to mass transit.    I don't mean to sound cold hearted, but people these days think they HAVE or are ENTITLED to have crap they really don't need.  Sadly, it has been built into our culture.

 

Again WHERE do we draw the line???           

 

I won't just use lower income people as an example.  There are tons of people living in half a million dollar or more homes with $100,000 worth of vehicles sitting in their front yard that are using these services too.

 

This financial mess will be with us for awhile (I'm fearing decades), and we are all going to be forced to live within our means. 

Obviously free market principals don't make cops or laws obsolete... not sure where that assertion came from.  I'm not saying that all regulation is bad, but there is a fine line that we need to make sure we don't cross.

 

I really don't think free market principles should trump morality, ever.

 

I agree with you 100% and I hope my comments don't lead anyone to believe anything else, but like I said there is a fine line between protecting and controlling the American public.  I don't believe in this case that we have a moral obligation to protect people from payday lenders.  People use these services of their own free will.  No one is forcing them to take the cash advance.  In many cases it is their own financial mistakes or misfortune that has led them to utilize a payday lender.  We do have a moral obligation to protect people... but not from themselves.

With this you'll see another spike in crime. IF someone can't get a loan. They may just steal it.

I often hear "free market principles" cited to defend what is quite obviously immoral activity.  I don't want to drag in off-topic examples when this is a perfect one right here.  If communism fails to account for human laziness, capitalism fails to account for human viciousness.  Nobody charges 391% interest without making the world a much darker place for all of us.  These "services" have nothing to do with free will and everything to do with kicking human beings when they're down.  How much economic "free will" a person actually has depends on their access to capital.  Circumstances can force people into awful choices.  "Willingly" profiting from the fact that someone is desparate enough to "willingly" pay 391% interest is diabolical.

^Good point!

With this you'll see another spike in crime. IF someone can't get a loan. They may just steal it.

 

Good point.  It opens a whole new can of worms, but I think you're right.