Novemeber 4th will be here before you know it.

We are only a few weeks away from the elections and things are really starting to heat up.  Ohio has many issues on the ballot this year but I have been talking about Issue 5 lately which is in concern to the Ohio Payday Lenders. 

I ran my first post on this in early September “Are Payday Lenders Good For Consumers?” and a month later I revisited the issue to see if any positions had changed.  I wrote “Are Payday Lenders Good For Consumers-Revisited?” 

I also have a poll going on the home page to the left if you would like to throw your vote in on what you feel you would do.

In this post I have decided to post some of the prominent comments I have received in the last post I did on this and I got some great comment on this.  If you are still deciding on which way to go with this issue then you may want to read this.  If you would like to find out how this issue ends up and what the other readers comments are you can subscribe to my RSS here.

Readers Comments

Marc was the first to respond and he had a lot to say.

The issue is that by limiting the interest rate legislators essentially banned payday lending. It’s not as if many or any lenders can stay open at a 28% APR. That would mean that they would only be able to charge $1.17 per every $100 borrowed. Given that the average payday lender only makes between a 3% and 7% profit on the “high” interest rates currently charged, it’s difficult to see how they could remain in business with the lower rate. What will happen is that people who need a payday loan will not have that option and will turn to a less desirable alternative. It’s not as if getting rid of these loans will get rid of the need for these loans.

You remark “if I were a consumer going to a payday lender to get a loan would I want to pay 300% interest or would I rather pay 28% interest.” Borrowers don’t really seem to think this way. According to surveys of borrowers, they choose payday loans mainly out of reasons of convenience. They don’t shop around on price. That’s pretty clear when you consider that before the payday lending ban anyone could have opened a store to loan money at 28% APR. Why didn’t someone do so? It seems that if a businessman could have made a profit at that rate (a dubious proposition) and if consumers were really concerned about paying “excessive” interest, then the businessman who opened that store would have cleaned up in the market. The fact that this didn’t happen should indicate that it’s just not a realistic scenario, either from the business side or the consumer side.

Then Donnie who has replied at everyone of my post on the payday lenders has stood to his decision that payday lenders should be regulated more.  I personally still agree with this decision but decide for yourself and let me know in the comments.

Donnie said:

I agree with many of your points. Most consumers, if they knew what they were being charged (no payday lending ad mentions 391% APR or the fact that they are talking about payday lending), wouldn’t “choose” 391% APR over 28% APR. The industry has mounted a major effort to deceive and confuse voters. The jobs argument is one of the biggest cons out there. Of Ohio’s 1,600 plus payday lenders, 1,130 of them have applied for licenses from the Ohio Department of Commerce to operate under the new law. So, it appears most of them are still going to offer services of some kind. The payday lenders have also put up an ad suggesting that “Big Brother” is going to be watching you because the bill passed in June requires a database that ensures payday lenders’ compliance with the new law! What they don’t mention is that they payday lenders have their own UNSECURED database that has all kinds of information about you from your landlord/tenant records to your bankruptcy case proceedings.

Don’t fall for all their misleading ads and deceptive mailers! Reign in reckless predatory payday lending by voting yes on issue 5!

Finally PT from Prime Time Money piped in and said:

It’s sad that people have to resort to this type of financial product to keep them a float. I can’t stand to see the payday loan businesses. Still, I don’t know what I think about running them out of business. I mean, they are filling a need…but so would marijuana stores if they were allowed.

The free market man inside tells me to let them do what they do and that the uneducated will always make poor choices.

I guess at the end of the day, I’m just for more education. Something like the “truth in lending” act expanded for these loans would be beneficial.

In all the comments I would have to agree with PT the most.  It’s all about the education and what you don’t know can really hurt you.

I will be doing one more post on this subject on November 5th to share my thoughts on the results and to get your comments and reactions on the results.  Also don’t forget to vote on my issue 5 poll on the home page.