Tuesday, October 21, 2008

Stop Toxic Payday Lending Interest Rates


By Bill Faith

Ohio partisans have set aside their usual election-year differences and have joined together to urge a “yes’’ vote on Issue 5. Gov. Ted Strickland, a Democrat, agrees with Republican legislative leaders on this one. The two major party contenders for Ohio attorney general are also in agreement.

Issue 5 asks voters to accept or reject Ohio’s new law that caps interest rates on payday loans at 28 percent annually, down from 391 percent APR allowed under the old law. Ohio lawmakers approved the 28 percent interest rate cap after a year-long legislative debate. Ohio legislators authorized payday lending in 1995. By 2007, Ohio had nearly 1,600 payday storefronts -- and payday lenders had more than 300,000 Ohio customers trapped in a cycle of debt, contributing to everything from a rise in demand for food pantries to an increase in home mortgage foreclosures.

While it’s easy for some to blame the victim, our legislators rightly concluded that the problem with payday loans is their flawed design. They are very easy to get but very hard to repay.