Heads up to legislators across the country - perhaps you should emulate the lawmakers of Ohio and Colorado on this very important issue - payday lending regulations.
The Ohio Senate has passed a bill that was also passed by the House that will change the face of legal loansharking, also known as payday lending.
The Columbus Dispatch reported that if the 1,600 payday lending stores in Ohio want to survive beyond this fall, they will have to find another way to do business.
Payday lending, as it is today, will be no more in Ohio by the end of the year.
The bill in Ohio was controversial and the subject of heated debates, but in the end lawmakers decided that there would be no compromise with payday lenders. Lending companies that offer short-term, high-interest loans that have preyed on the financially vulnerable will likely be a bitter memory in 2009.
Ohio House Bill 545 takes the absurd annual percentage rate of 391 percent usually charged by payday lenders and cuts it back to 28 percent.
The bill also would prevent payday lenders from making loans with terms of less than 31 days and limit borrowers to four payday loans per year.
It also bans online payday lending.
Payday lenders say that these new regulations will close their doors and put 6,000 employees across the state out of work.
The Ohio Senate made some amendments to the bill, passed it and sent it back to the House for a concurrence vote. No problems are expected and lawmakers say that it's all but a done deal. Ohio Governor Ted Strickland supports the bill fighting such predatory lending.
The Ohio legislation did not set out to completely wipe out the payday lending industry, but recognized that the current model for payday lending serves to suck consumers further into unmanageable debt and causes many more problems than it helps.
When consumers begin to fall into the predatory lending trap, they often take out new loans to pay off old ones and the debt snowballs into a monster that few can handle.
Some lawmakers hope that payday lenders can revise their business model and operate under the new regulations by offering 90-day loans with a 28 percent interest rate, but lenders are not optimistic.
The payday lenders were unwilling to compromise on their high interest rates and lending practices, a fact that lawmakers say made it easier to pass the bill to force the issue.
Because the payday lending industry flatly rejected alternatives that may have kept them open, Ohio legislators felt that there was no other alternative but to pass the bill that the lenders say will put them out of business.
In the end there was no compromise and lawmakers were pressed to take a stand against payday lenders. In recent weeks, payday lenders made some last-ditch efforts to derail the bill by hiring more lobbyists, holding a huge Statehouse rally, flooding Senate offices with calls and running television and radio ads but it was too little, too late.