Why stop with capping payday loans? Banks are just as bad.

Obviously, banks have better lobbyists than payday lenders, why else can someone who has no problem charging $37.50 for a negative balance and $7 a day get away with not getting new rules imposed.

The Fed has been bailing out the banks with low interest auctions, when their balances go negative, and yet the consumers are still getting screwed. Here is a brief summary of what the Ohio Legislature passed recently:

House caps payday loan at 28% – OPENERS – Ohio Politics Blog by The Plain Dealer
The payday lending bill, which lawmakers of both parties described as necessary to free consumers from an industry entrapping them in a cycle of debt, will force lenders to slash the rates they charge consumers.

“This is a time we need to step up and do something,” said State Rep. Chris Widener, a Springfield Republican who sponsored the payday legislation, House Bill 545. “Today is the day we have to step up and make a change in Ohio s consumer finance law to help families and consumers.”

Payday lenders currently can charge $15 for every $100 lent over a two-week period, which works out to a 391 annual percentage rate. Under the new bill — which now heads to the Ohio Senate, where supporters are confident it will pass — annual rates would be capped at 28 percent.

Payday loans are typically less than $300, yet, credit card balances can be several thousand dollars. Which is worse, missing a payment on a credit card and having your interest rate go from that low intro rate of 15.9% to 29% or getting a payday loan to make the payment?

It’s not just bank fees and credit cards that are killing consumers already strapped with $4 a gallon gas, it’s also what happens when you get behind- and the “workout” arrangements that are contained in the fine print on the credit card statements or that home equity loan. No discussion allowed, you give up all legal rights to binding arbitration, and more than likely, miss a few payments and they can call the loan, plus the interest you were supposed to pay over a period of years- and ask for it to be taken out of your pay- up to 25% of your paycheck.

Guess what happens- instant foreclosure as you can’t make your house payment.

Even though the prime rate has dropped a good 3+ points, no credit card rates are dropping- and there is no way for any of us to refinance our loans on homes that were worth 20% more a mere 2 years ago.

In the meantime, the legislature has whistled Dixie, going after the “banks” of last resort, without even casting a mean glance on the credit card or banking practices.

What’s even worse, the devaluing of real estate is going to bite Ohio government on the butt even worse since so much of our infrastructure is paid for by property taxes. Once we’ve let so many people get screwed by the banks- there won’t be anyone to pay for schools, services, libraries etc. that are funded by those wonderful levys.

If the Ohio legislature really wants to help the people of Ohio they could force banks to pass the savings on the Fed’s interest rate cuts through to the consumers. Change the policies on overdrafts and limit credit card rate hikes, stop automatic “remedies” for late payment with catastrophic clauses and we may start believing that we don’t have the best politicians money can buy.

Payday lenders were only the tip of the iceberg. When gas prices hit $5 a gallon, you’ll see the instant sinking of the entire economy as more people can’t absorb the blows from all sides.

Do you think payday lenders were really the worst offenders? Share your thoughts.

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