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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9 Responses

  1. payday loans June 7, 2008 / 10:27 am
    I think the payday loan system is great! Theres not a single person who doesn’t have emergancy’s and payday loans really help out.
    There quick and easy and really do help.
  2. Gene June 7, 2008 / 10:33 am
    David wants our government to be our parents
  3. David Esrati June 7, 2008 / 11:49 am

    Gene-
    It’s ok for the government to be the parents for Bear Sterns- but not you and me?
    Give me a break with your neo-con crapolla.

  4. No fax payday loans June 7, 2008 / 8:22 pm
    The Ohio legislation is well intended but misguided. Evaluating the cost of a 7 to 30 day loan based on an annual interest rate (APR) just doesn’t make any sense. The transaction costs and bad debt expense to payday lenders cost a fortune. The fact is that most payday lenders make a profit, but not a killing.
  5. Stan Hirtle June 7, 2008 / 8:22 pm
    One problem is that national banks are immune to state regulation. The Supreme Court decided that they can export the laws of their home state to the state in which they do business. Delaware and South Dakota are to banks what Nevada used to be for divorces. One enabler of predatory lending was the immunity of banks and their subsidiaries to state regulation, plus some other federal laws designed to “even the playing field” for other lenders. Plus even among the Democrats, Senators Dodd and Biden represent banking states.
    Read what Harvard Law Professor Elizabeth Warren says about the “tricks and traps” model of banking. Banks now make half their profits off of penalties, and are particularly bad on young people who use ATM cards a lot. Penalties should be revenue neutral, just covering whatever they cost the bank.
  6. Gene June 8, 2008 / 4:46 pm
    The governement should not be parents to anyone. I am not a neo-con, but when you get exposed you pound your fist and cry. Truth hurts.
  7. rocio June 9, 2008 / 2:52 pm
    Payday loans are not intended to be long term and are meant to help people in need. It’s an option for someone that doesn’t want to get caught up with credit cards debt that just keeps accumulating.
  8. Payday Loan Advocate October 18, 2008 / 2:52 am
    The current presidential candidates, Barack Obama and John McCain, supported an anti-payday loan bill in 2006. The bill, which took effect in October 2007, put a 36 percent cap on the interest rates that payday loan stores charge military personnel. The basis behind the bill was the increasing number of American soldiers that found out that loans had been taken out in their names without their consent. Many of these loans were either given to identity thieves or to their spouses. More often than not, the loan recipients borrowed money, but did not repay the loans. A majority of the loans should never have been approved in the first place because the applicants didn’t meet the qualifications. Military personnel as a whole are generally considered low-income and sometimes, unfortunately, considered to possess very little financial knowledge. The government wanted to prevent identity theft of military members because it would also prevent security breaches. Therefore, the government ruled in favor of the measure. Barack Obama would like to employ the measure nationwide. If the same interest cap is imposed throughout the U.S., the payday loan industry will be wiped out. Take time to think about who you’re voting for because your financial liberties are at risk in this election.
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  9. Gene November 10, 2008 / 3:40 pm
    Pay-Day Loans are going out of business in Ohio – thanks to the voters. They are costing Ohio thousands of jobs, and the irony is that the people who voted for this are the same people wanting jobs to move to Ohio. Ohio Voters = Dumb Asses of the Year.

    Ohio is in bad shape. And now it looks like banks will offer cash advances of $500 for people who have Direct Deposit, and the fee will be $50 – or no less than 10%. Ohio Voters, once again you F*CKED your fellow Ohioan!

    Ohio is so smart, S-M-R-T!!!!!!!!!!! (a Simpson’s ripoff)

    If you want to change the world, why don’t you want to change yourself?

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