Battle Over Payday Lending Law Heats Up in Ohio – Total Bankruptcy
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Payday Lenders Push for Repeal of Payday Lending Law


The battle is heating up in Ohio over the state's new payday lending law.

Ohio lawmakers have passed legislation that restricts the amount of interest that check cashing stores and payday lenders can charge on the short-term loans that are the backbone of the business.

The payday lending industry has its army hitting the pavement to collect signatures. With enough signatures, the industry will be able to have a question put on the November 4 election ballot, asking voters to repeal part of the payday lending law that goes into effect on September 1.

The Toledo Blade reported that Ohio Governor Ted Strickland, House Speaker Jon Husted and Senate President Bill Harris have joined forces in a campaign to make sure that the law stands. They have suggested that the payday lending industry is spending as much as $16 million in an effort to have the law repealed.

The payday lending law does not ban short-term or small consumer loans. However, the payday lending industry has complained that it will put them out of business because it limits the interest rates on these loans.

Lawmakers worked to ensure that interest rates on payday loans would be kept at a reasonable level to ensure that consumers would have a chance at being able to pay it back. With the current model, many consumers are being driven to bankruptcy due to the cycle of debt payday loans create.

Husted said that the law does not ban small loans, but did ban a defective product.

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The payday lending industry has complained that the law will put as many as 6,000 Ohio residents out of work. They say that some of the cash advance stores have already closed their doors because the new law will make it impossible for them to operate.

Kim Norris is acting as the repeal effort's spokesperson. Norris claims that 90 percent of payday loan customers come in for small loans that they repay within two weeks with a small amount of interest. She says that consumers know what they are getting into when they take out these loans.

However, if that were truly the case, lawmakers would have likely never passed the new law because it would not have been necessary.

The fact is that consumers who are already financially distressed are generally the people who utilize the payday lending stores. It is an act of desperation on the part of borrowers, as the 300-400% annual interest rate charged by these lenders makes the loans incredibly difficult to repay.

To make matters worse, debtors who are unable to pay often wind up rolling their loans into new loans or taking out other payday loans in order to keep up with the payments. This creates an endless loop of debt that can easily spiral out of control.

Still Norris says - with a straight face - that high-interest payday loans are preferable to credit card debt or bounced check fees.

The repeal effort focuses on the section of House Bill 545 that limits the annual interest rate charged by payday lenders to 28 percent and limits the number of payday loans that a borrower can take out in a year.

The payday lending industry says that the 28 percent interest cap is not high enough to keep them in business. However, many of the payday lenders have already applied to the Department of Commerce to convert their current licenses into the small-loan business licenses that will be required under the new law.

The industry has been paying people to circulate petitions and get signatures of registered Ohio voters. They need a minimum of 241,365 valid signatures by August 31 in order to get the repeal question on the ballot. If enough votes are collected and the petitions are filed, there will be a delay in the objectionable section of the payday lending law taking effect.

If the payday lending industry is successful in getting the issue on the ballot, they would then have to wish upon a star that enough voters would actually agree that it is okay for them to charge more than 300 percent interest on payday loans.

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