Ohio Payday Loan Laws Update

Ohio’s attorney general has approved proposed language
for use in a petition drive seeking to repeal new payday loan regulations set to become effective in 2009.

Supporters of the payday loan industry required AG Nancy Hardin Rogers to OK the language for petitions seeking to get a referendum for the law’s repeal on the November ballot.

Rogers approved as “fair and truthfu”l the petition drive’s summary of the pertinent portion of the law.

The new law, if it actually becomes effective in 2009, caps annual interest rates at 28%, down from 391%.

Gov. Ted Strickland on June 2 signed the bill that puts the new restrictions into effect. Payday lending businesses point out that the law change would force them to close offices, lay off thousands of employees, and remove another financial choice Ohio residents currently have .

Rather than regulate the payday loan product out of business, if the new law were to take effect, it would force Ohio payday loan consumers to apply for payday loans via the Internet or call centers.

Regulators cannot put an end to demand for payday loans! At best, they simply force consumers to reveal their social security and bank account information to payday loan companies residing in other states or offshore.

Additionally, the state loses the revenue derived from licensing and auditing, employment and sales taxes. It’s ridiculous!! Why not let the market dictate rates and fees by allowing competition to exist? Guess they THINK they know what’s best for ALL of us.


Canada Payday Loans Manitoba

Manitoba Provincial legislation to put a cap on interest rate loans takes
effect this fall. The province has approved the rate upheld by the federal
Criminal Code, to set maximum interest rates for short-term loans.

Manitoba’s Public Utilities Board has ruled that interest rates will be
capped at 17 per cent for loans under $500.

The limits on interest rates charged by payday loan companies will be
determined by the size of the loan.

It allows payday loan operators to charge a certain rate for certain sizes
of loans.

A “payday” loan is anything up to $1,500 dollars on a short-term basis.
However, the Public Utilities Board has said you can charge up to 17 per
cent until you hit one-third of net pay of the loan ($500) then the interest
rate drops to 6 per cent off the total loan.

It was pointed out that 6 per cent on an annualized rate is still 144 per
cent interest that consumers must pay.

The interest rate on at 6 per cent on a two-week loan equals about 144 per
cent a year.

The goal was to strike a balance between protecting consumers and having the
short-term credit product available to consumers.

See for more information.


Payday Loans & Indian Affairs

Senate Indian Affairs Committee hearing weighs testimony

WASHINGTON – A hearing of the Senate Indian Affairs Committee on predatory lending dwelt more on payday loans, and came with several cautions as to the difference.

Statistician Patricia Cirillo explained after the hearing that predatory loans – high interest rates and onerous terms, usually to people whose impaired creditworthiness has made it impossible to get better terms – come with every so-called ”risk pool” of the lending industry. The collapse of the national home mortgage lending market, in large part due to predatory loans from once-respected lending institutions to people of good credit standing, is a case in point, she said.

In any case, the conventional understanding is that so-called subprime loans, at interest rates above the prime rate available to the most creditworthy among us, are distinct from predatory lending, with its loan-shark interest rates and other advantage-taking business practices.

A committee spokesman said the hearing treated payday lending as a part of predatory lending, a distinction strongly resisted by Cirillo in written testimony and at the witness table by Jamie Fulmer, director of public affairs for Advance America Cash Advance, a payday lending company.

Fulmer appeared as a representative of the Community Financial Services Association of America, which has member organizations in and near Indian country, and he emphasized that the bad business practices of predatory lenders are simply bad business.

Payday lending is a comparatively new industry, he added, and CFSA best practices in payday lending, combined with reasonable regulation and advances for financial literacy in Indian country, will continue to spread measurable prosperity through communities.

Committee chairman Sen. Byron Dorgan, D-N.D., began the session with reminders that not all payday lenders in Indian country are bad, and additional financial services there are ”good news.”

W. Ron Allen, secretary of the National Congress of American Indians and chairman of the Jamestown S’Klallam Tribe, called for financial literacy, banks, credit unions and community development financial institutions in Indian country, but also cautioned strongly against any kind of draconian new regulation that would drive payday lenders away from reservations. The short-term loans provided by payday lenders are essential to impoverished communities where so many live day to day without a good income cushion against hard times.

Tex G. Hall, past chairman of Three Affiliated Tribes in North Dakota, chairman of the Inter-Tribal Economic Alliance and CEO of the MTE Management private equity firm, went still further in written testimony.

”The fact is, payday loans are for small amounts … usually for two weeks [at 15 percent interest] … Mr. Chairman, you and I both know, banks will not loan such small amounts for short terms, there is simply no profit in it. … [CFSA] members only give loans to consumers who can provide proof of employment or other steady source of income, and proof of an existing checking account. This indicates a reasonable expectation of an individual’s ability to pay. This also disqualifies many Indian people on poor reservations where the unemployment rate is often 60 to 80 percent from taking out a loan that cannot be paid back.”

Eleanor Rogers, a student at Navajo Technical College who attended the meeting but didn’t testify, had what sounded like a good last word afterward. Inflamed over the appearance and practices in a Navajo border town like Gallup, N.M., with its long vistas of payday lending outlets, some of them located in pawn shops, she gave a basic description of the problem with payday loans in her view.

”It’s not a short-term loan. It becomes a long-term loan.” Borrowers get caught up in a cycle of multiple loans a year, always paying out fees and interest on repeated short-term loans. Financial literacy is a solution, she said, but only if it’s basic and to the point: ”Just pay back a bill and learn to budget.”

Cirillo, of Cypress Research Group in Shaker Heights, Ohio, said, however, that what economists call ”economic shock,” basically in this context an emergency requiring cash outlays to address (think of a car radiator springing a leak) hits households nationwide an average of four to six times a year. No comparable Indian-specific number is known, she said, adding that even at four to six times a year, people would need repeated short-term loans.

A March report by First Nations Development Institute in Longmont, Colo., titled ”Borrowing Trouble: Predatory Lending in Native American Communities,” appeared to get short shrift at the hearing, though the committee relied on it for the definition of payday lending as a part of predatory lending. In a review paper submitted to the committee, Cirillo shredded its credibility. She left no major point of the First Nations study unmolested. No one paid her to write her paper, she said.


Payday Loan & Check Cashers-Consumer Protectionists Know What’s Best for All of Us

Once again, the people who know what’s best for all of us have restricted our financial choices. We cannot continue to open payday loan and check cashing stores in Long Beach. So, Long Beach City residents will continue to pay the maximum fees prescribed by law for these services.

During the past several weeks we had noticed a few payday loan stores in Long Beach beginning to offer reduced fees and even “free first time loans”. You can bet these grandfathered locations will soon cease to offer deals like these to Long Beach consumers. Why should they? With less competition they won’t need to.

Less payday loan and check cashing stores will mean fewer jobs, less city taxes, less oversight, fewer choices and more. The city fathers surely don’t think they’ve reduced demand for payday loan and check cashing services do they? They have simply forced more consumers to drive a little farther, perhaps even to a nearby city, or worse, to apply for a payday loan on the Internet.

Long Beach passed an ordinance to restrict the growth of new check cashers and payday lenders in the city.

On July 1, the City Council voted on a six-month moratorium prohibiting the approval of new check cashing and payday lending businesses. The moratorium directly addresses the social and economic impacts these businesses have on the community by stemming their expansion. (Again, they may slow their expansion BUT there remains a HUGE demand for these products!)

The California Reinvestment Coalition and other fair lending advocates (read overly zealous consumer protectionists who THINK they know what’s best for ALL OF US.) across the state are campaigning for local land use ordinances in major California cities, and for a statewide interest rate cap on payday loans. (This will simply force Californians to drive, walk, bus, hike to another state or use the Internet to get their money or cash their check.)

“Payday lenders charge borrowers outrageous interest and fees, which often trap consumers in an inescapable cycle of debt,” said Liana Molina an organizer with the California Reinvestment Coalition. “It’s significant that the City of Long Beach is using their authority to restrict the growth of these businesses.” (Same ol’ BS. Have you ever heard of an independent study documenting complaints by payday loan and check cashing customers complaining about “outrageous interest and fees”?)

The City Council already approved a moratorium on new payday lenders and check cashers in the downtown area, which went into effect April 22. The ordinance approved by the Council 6-3 on July 1 will extend that moratorium citywide, including all redevelopment project areas.

The California Reinvestment Coalition advocates for the right of low-income communities and communities of color to have fair and equal access to banking and other financial services. CRC has a membership of more than 250 nonprofit organizations and public agencies across the State.
SOURCE California Reinvestment Coalition

When will these people decide it is illegal for me to purchase more than 3 Mc’Donalds burgers each week? Or wear a seat belt? Or hands free cell phones? Or I must have auto insurance? Or smoke free restaurants and work places?

Why can’t they just leave it up to me to frequent the businesses and services I want to support? Oh, I forgot! THEY know what’s best for me.


Payday Loan ACH Processors Take Some Heat

Panic caused by rumors of the Feds attacking payday loan ACH providers began late last week! After MANY frantic faxes, emails and phone calls it appears the companies at risk are all off-shore payday
loan companies who lack Federal Tax ID’s and failed to file US tax returns. Questionable activities also include the potential lack of “proof of ACH authorizations” and an excessively high “ratio of claims”. It appears two ACH processors are involved.

Further information learned today reveals a regulator with the OCC over-stepped their mandate. It seems the regulator took it upon herself to attack the “single-choice-of-law” payday loan model and offshore operators. No cease and desist orders were formally issued to any banks or ACH processors.

Final disposition is premature at this time but our CONSERVATIVE sources advise payday loan internet providers to secure licenses in states and provinces having “safe-harbor” legislation, max out at 3
rollovers, and ALWAYS secure a fully documented “Proof of ACH Authorization” from your customer.

On the other hand, several compliance consultants we contacted feel the “choice-of-law” model is not at risk!

Bottom line: it’s the payday loan product in conjunction with the Internet. Think “wild, wild, West”!!!!