Szollosi Statement on PayDay Lending
This in via email:
Opposes “Loan Shark” Campaign To Protect 391% APR; Scores of Other Predatory Lending Practices
Szollosi statement for state coalition press conference today, August 12, 2008 at AARP Headquarters, 17 S. High, Columbus (1:30pm):
“Citizens of Toledo, Lucas County and across Ohio have suffered at the hands of predatory, legal ‘loan sharks’ disguised as “payday lending” businesses for over 10 years. Granted an exemption from the state’s usury laws in the mid-90’s, corporations such as “Cashland” and others have opened literally thousands of new storefronts for the purpose of sinking their hooks into new ‘customers’ through misleading loan practices. People least able to afford these 391% APR loans, hurting through our tight economy, are induced to go into debt and be kept there through bullying, predatory tactics. Personal credit is demolished, loan shark initiated court action is swift and without mercy, and Ohio’s struggling families suffer.
To their credit, Ohio Governor Ted Strickland and members of both political parties came together in the Ohio General Assembly, finally, to overwhelmingly pass legislation capping the lending rate at 28%, limiting the number of short term/high interest loans per year, and establishing other pro-consumer. pro-savings incentives.
In response to the loan shark industry’s ballot intiative, which seeks voter approval to throw out the Governor’s much needed reforms, a state coalition opposing “payday lending” seeks to present the truth to Ohio’s voters this year.
In June, Toledo City Councilman Frank Szollosi rallied his colleagues to unanimously support a City Council Resolution in opposition to the loan shark ballot initiative. He and others across Northwest Ohio will continue to speak out, organize and work to defeat the loan shark efforts to overturn long overdue and critically needed pro-consumer reform”
For additional information: ohiocoalitionforresponsiblelending.org
Amazing that there is no call for personal accountability, just an attack on a legal business.
August 12th, 2008 at 9:36 amTotally agree with you VOR!! If people choose to use this service, why take away their choice? It’s their business, not the business of government. Stay out of our lives and personal decisions.
Both Szollosi brothers support unions. Unions exist because members pay union dues in order to work. Why should you have to pay to earn a living? Please Frankie and Matt, tell me why.
August 12th, 2008 at 10:28 amI wonder if charging 391% interest is bad, and taking people to court is bad and makes these companies be called “Legal Loan Sharks” what are banks? They charge more per bounced check fee and charge more than once and in addition to being charged up to three times a bounced check fee, you can face charges in court, and additional feees to whoever the check bounced to, which are not civil but in Ohio it’s a criminal offense to bounce a check.
If you bounce a certain number of checks, even if you’ve paid all of the fees, your checking account can be closed and you can be reported to Chex Systems, which means you can not open a bank account (some banks will not even let you open a savings account or have a debit card) for seven years.
I’ve never understood why it’s legal and acceptable for banks to potentially charge $75.00 in fees ($25.00 up to three times) on any dollar amount of a check (and they take their money first) but the pay day loan industry is the total focus of predatory practices that hurt lower to middle income people. Many of those I know that did use payday loans did to avoid bouncing a check because it was less expensive and their credit scores did not give them the ability to have any kind of over-draft protection.
I’ve never discovered what the solution is supposed to be for those who face that situation without using pay day loans. While I’m sure there are some that are living above their means in the pay day loan situation, there are also people who because of the current economic situation need that emergency assistance. My main concern with this has been what happens to those who used the Payday loans? Their financial problems don’t just disappear…
August 12th, 2008 at 10:43 amMy bank recently increased my monthly “service fee” to $10 for a $400 credit line attached to my checking account. Assuming I max out at all times resulting in the lowest possible A.P.R. that computes to 30% before they add the actual interest charges. If I use only $50 of the line the effective A.P.R. balloons to 240%. The fees continue whether or not I actually use the line, so if I don’t use it the rate approaches infinity. Do you hear the Jaws music playing in the background?
Please protect me from these greedy obscene profit grabbers.
In a competitive market, why haven’t the other financial institutions stepped up to better serve these customers? Bottom line is if they could they would.
Frank, as amazing as it sounds, somehow the payday lenders have failed at “sinking their hooks” into me, even though it seems you can’t drive past a strip mall in Toledo without seeing one. There could be a time when a payday loan becomes the best alternative for my situation and you and the rest of my nannies in government want to take that option away from me. As long as they disclose the terms and stick to them, if I don’t agree to the terms I don’t sign.
August 12th, 2008 at 10:48 amVery good points Lisa!!! I never got why banks charged ATM fees. The customer is doing the work of the teller. I sometimes call my bank for my balance. The teller told me I could check this online by completing the form and then paying a one-time fee. For what, for accessing my own information and not using a teller to do it. I wonder if the banking industry is behind this.
August 12th, 2008 at 10:54 amI’ve really struggled with this one. Last year, for my column with the Toledo Free Press, I did a series of financial makeovers. Some of the people I met with were hooked by these payday loan companies. And not just one but 3 to 5! One woman was paying over $600 a month in fees. I too believe in personal responsability but… I’ve never come across someone who has used the service as described. Not saying somewhere there isn’t someone, but I haven’t found them.
August 12th, 2008 at 11:26 amThey are out there Troy, but here’s the thing I’d guess with the people you met, once you borrow more than you can afford to pay back, you end up in the cycle of having to borrow again. That is a problem, and it is really hard to stop that cycle. Yet, even in that scenario, does merely eliminating the payday loan industry stop the initial problem that created the whole chain of events?
I recommend this article, reading all of it if you are interested in the over all topic of payday loans and banking but specifically page 6, it lists some of the various studies out there as to the “typical pay day loan” user.
August 12th, 2008 at 11:41 amPam, I wonder at times too, as well as the State, take for example the debit card system that Child Support uses, I always found it ridiculous that you are assessed a 75 cent charge to withdraw cash through an ATM, and even higher if you don’t use the one ATM system that is “approved”.
There are ways around it, at least for now, like using it at one of the local grocery stores to withdraw cash when you make a purchase, but supposedly the savings from going to a paperless payment system should create a scenario where it’s not the children who end up paying for these fees.
August 12th, 2008 at 11:50 amThe card can be used at all 5/3 atm’s at no charge.
August 12th, 2008 at 12:02 pmIf I have $500 and I want to loan it to you and you agree to pay me back $600 in two weeks, it is no business of the government stop that transaction from occurring. I am sooooo tired of power hungry politicians like Szollosi who think they know better how to control peoples’ lives.
http://rightwingprofessors.blogspot.com/
August 12th, 2008 at 12:07 pm5/3 charges 75 cents, unless they recently dropped the charge. I stopped using mine at their ATM but in checking my account online? When I did use it at 5/3 .75 was deducted from the account, it shows up as “ATM Withdraw Fee”.
August 12th, 2008 at 12:09 pmI don’t like the payday loan places. In my opinion, they bring neighborhoods down. I think they do exploit the poor. But, I was talking to a lady who works at one of those place as a loan collecter. She told me that most of the people she has to call to “remind” that they need to make a payment are people who are professionals (lawyers, doctors, business people), people who you wouldn’t think would need this type of service. That surprised me.
I’m thinking that the reason why there is such a fuss about the payday loan places is that so many people use them. And shutting them down isn’t going to take care of the problem. There is a reason why people are willing to borrow money at such a high interest rate.
Maybe they should focus on getting some good paying jobs into the area.
August 12th, 2008 at 12:13 pmJason – the fee still exists according to this fact sheet, 75 cents for an ATM withdraw and 40 cents to do a balance inquiry.
Robin, that’s my way of thinking that you have to eliminate the root cause of why some people actually “need” these services. Unless of course we all take up Rightwing Professor on his offer.
August 12th, 2008 at 12:18 pmCongratulations, folks! You’re all successfully peddling the industry line and perpetuating their smoke and mirrors tactic. Bank fees, bank fees, bank fees! House Bill 545, the bill the payday lobby is attempting to gut, deals with the serious payday lending problem we have in Ohio. High bank fees are a problem as well and there will no doubt be legislation to address those, but that doesn’t mean we should accept 391% interest from the payday lobby. We need to prevent usurious, exploitative payday lending from wreaking any more havoc on our struggling state and economy. Is 391% the best we can do, folks? I think not.
August 12th, 2008 at 12:20 pmRick, if you believe ignoring the reality of what caused people to turn to this industry and what made it grow is peddling the industry line? Then I guess I am. If the true goal was to deal with this as a total issue it would have been done that way, dealing with payday loan and the banking industry as far as a legislative package.
Far more people face bounced check fees and the many issues related to banking fees than uses these pay day loan services. 1.2 million bad checks are written daily in the US.
August 12th, 2008 at 12:33 pmAs far as industry talking points? Unless you believe Morgan is a payday lending industry person, CNN reported last year:
A paper by Donald Morgan, a research officer with the Federal Reserve Bank of New York, indicates that payday lending may be preferable to some alternatives. In two states where it was banned, he found, consumers were worse off.
They’re more likely to bounce checks, he found, which is more expensive than payday loans. Fees on bounced checks can carry an annual percentage rate of 1,000 percent.
So which is worse? 391% or 1000%? Even with my limited math skills it seems as if ignoring the bank aspect only makes it more difficult for those who are caught in the middle…
August 12th, 2008 at 12:42 pmEverything is bad for you if you misuse it or abuse it. We are free to succeed, and we are free to screw up our lives. Make your choice and live with it, but don’t rob me of my resources just because some people abuse their resources.
If I eat 50 Hot Pockets for lunch today and need my stomach pumped, will Frank crusade against Kroger for selling them all to me, or maybe he should regulate my microwave oven so it can’t heat up that many Hot Pockets in any one lunch our? I like to demonstrate absurdity with absurdity, but you get my point…
August 12th, 2008 at 1:05 pmRick, you are the one that doesn’t get it. I don’t want them regulating my bank fees either. ATMs require significant investment and maintenance and banks, like any business need to have the opportunity to earn a return on that investment. I also have the right to avoid using the ATM if I think the fee is too high. The point is that it is MY choice. I may not always make the best decisions but I will take my judgement over what the government thinks is best for me any day. As it turned out in the scenario I described earlier I called the bank and switched to a plan with no monthly fee. If they didn’t offer one, I would have switched banks to someone that did, or simply done without the service. No government assistance necessary. When it comes to running a business, the only thing government is good at is screwing it up.
Quite frankly, many consumers abuse the privileges by writing checks they know are no good and there needs to be a disincentive for that or it would become cost prohibitive for any person or business to accept checks. If you are in the habit of making honest mistakes, either change your habits or change your bank to one that has a lower NSF fee and they DO exist. As long as there is competition (which government regulation would decrease) the system will work.
August 12th, 2008 at 1:09 pmHere’s where we disagree Bob, if they are going to regulate one part of the problem, then they should also regulate the larger industry that is also part of the problem. Or regulate neither and focus on economic solutions which will make a good portion of this whole issue a non-issue.
Yet realistically with the amount of campaign donations that the banking industry contributes nationally and here in Ohio, many seem to not realize that the reason why the payday loan lenders are the focus is they don’t have the same lobbyist power as banks and the banks will be the ones who profit if the payday loan industry were to cease to exist.
The easiest way to defeat your competition is to eliminate them, or if you have the power, make it more difficult for them to legally operate.
August 12th, 2008 at 1:42 pmWhile I am normally not a fan of government doing anything that limits free enterprise, I have to remind myself that not all people in this country sophisticated and or money smart. I don’t want to get into the reasons for this because we all know that there are many. However, these companies, even though they are perceived as needed and used by many, are doing nothing more than preying on those less fortunate and perhaps less sophisticated.
My personal belief is that financial institutions have plenty of other ways that are much more legitimate to bend people over than to gouge those that really are having difficulties managing their finances.
And yes, I still believe in drug testing for anyone on welfare and I believe everyone should work. Those that can’t can easily rock babies for those that need to work and can’t afford child care.
August 12th, 2008 at 1:51 pmAll this talk about “predatory lending” by government is just to show people that government “cares”.
What the “payday loan” regulation is all about is to get people to stop looking at what government does with the money it collects through “predatory taxation”, government’s redistribution of wealth, and government’s wasting and misuse of taxpayer dollars.
The real issue is whic is more dangerour to our finances–payday lenders or government?
August 12th, 2008 at 2:05 pmLisa, we do not disagree. Government has no business regulating rates and fees of payday loan companies or traditional commercial banks. Like VOR, I was using absurdity to prove a point when I suggested I needed to be protected from the greedy banks.
I also don’t disagree with the posters that recognize there is a problem with some peoples’ lack of financial knowledge and/or discipline. Government regulation will not only fail to fix that problem but it will eliminate these services for those who use them responsibly and it will increase the cost of financial services to everyone else as institutions are forced to find other ways to make a profit to remain in business. Having some financial education and consumers that are willing to take advantage of it would be a much better solution.
August 12th, 2008 at 2:26 pmJay, I don’t disagree that it is designed to show that government “cares” but I can’t escape the reality of what are those who currently use these services supposed to do?
Not once in the many times this issue has been the source of press release after press release has anyone mentioned what the “victims” of payday loans were supposed to do as a viable alternative. Which is why I am at odds with many of my progressive friends on this particular issue.
What’s even sillier is that the online payday loan industry, that charges higher fees than the ones in Ohio would still be there, even if the threats of the PayDay Loan industry that they would close up shop if they have to charge lower fees are true.
Let’s say they don’t, and let’s say that those who support regulating them “win” and the fee is lowered, it still doesn’t end the problem…People who are not earning enough money to be sustainable based on their paychecks…
August 12th, 2008 at 2:29 pmThere is nothing more entertaining than reading all these Socialistics and Libertarians posts in here. Carry on folks!
August 12th, 2008 at 3:07 pmWhatever happened to “spending within your means” and “down-sizing your household”?
August 12th, 2008 at 3:50 pm“PREDATORY LENDING” “PRICE GOUGING” “WINDFALL PROFITS” “ITS FOR THE CHILDREN”
Pick your emotion evoking government regulation adjective from above, insert the area in which you seek to reduce freedom afterward; a proven recipe for success in limiting liberty.
TAHL
August 12th, 2008 at 4:46 pmFrankie needs to take a lude!
August 12th, 2008 at 8:13 pmhttp://www.end391.org/
August 12th, 2008 at 9:04 pmThat part of this story also was part of the discussion today Frank, here it does make their position more difficult to present for those concerned with that aspect as opposed to the larger issues.
I know you were busy though, with a marathon council session.
August 12th, 2008 at 9:14 pmFrankie boy, please stop trying to control people. GET A LIFE.
August 12th, 2008 at 9:23 pmWhy can’t you do something worthy of an elected official and try to get jobs in this community. Please stop trying to be socialist big brother. You are only making a complete fool out of yourself, Frankie.
PS – Just a word of advice. Try not to appear like you are controlled by the union bosses all the time also. This might make you seem like more of a man.
August 12th, 2008 at 9:29 pmTee Hee. This kind of reminds me of the folks trapped in unions. No hope. No where to go, but down. http://www.end391.org/
August 12th, 2008 at 9:32 pmWhat I meant was, these lenders to me are no worse than his union bosses. Why doesn’t Frankie challenge these pariahs of society?
August 12th, 2008 at 9:36 pmWhy doesn’t anyone care about the people actually faced with the economic reality that they are in a situation where they need to use a pay day lender is what I’m left with.
It’s never been addressed and we can talk about what monsters the PayDay Lenders are all we want but the reality is banks are no different, and when you are about to have a utility shut off or your car breaks down or you have some type of a financial emergency if they are successful in driving out the payday loan industry – what are these people supposed to do?
We have people in Toledo right now facing eviction, that are living without utilities, that are facing loosing their job if they can’t repair a car and no matter how you slice this, until we address the real economic issues of this State, where are they supposed to turn to for help? I don’t think any of those who are blaming the pay day loan industry have ever lived the way some Ohioans are right now.
It totally sucks to pay 391% for a loan but they make the decision that it is better to pay that than to have nothing. Even if the interest rate drops to what this legislation that starts in September calls for? It’s still not going to change what those families are going through…and if the payday loan lenders do close up shop? Not only will thousands loose their jobs but then what?
August 12th, 2008 at 9:50 pmWell, I saw another post about the so-called Federal Reserve paper written by Morgan. This often gets a lot of traction despite the fact that this report actually wasn’t released by the Federal Reserve Bank of NY. Read this Center for Responsible Lending report debunking the Morgan piece: http://responsiblelending.org/issues/payday/briefs/crl-critique-of-payday-holiday-how-households-fare-after-payday-credit-bans.html.
The industry likes to spread around the Morgan piece b/c it’s just about the only research paper ever written that suggests payday lending is a good thing. There are about 200 that suggest otherwise!
August 12th, 2008 at 9:52 pmMy bad. Here’s a direct link to the CRL piece: http://www.responsiblelending.org/pdfs/crl-morgan-critique-12-10.pdf
August 12th, 2008 at 9:54 pmI’d point out that the link I provided was not from the industry – that it was from CNN and that the other link provided earlier talks about the differences in some of the various research that was done. It looks more closely at both sides of the discussion than most of the sites out there that have a bias one way or the other.
Unless you are suggesting that CNN is a part of the industry…
August 12th, 2008 at 9:59 pm>> Whatever happened to “spending within your means” and “down-sizing your household”?
You are exactly correct but many don’t do that. Americans don’t save. Americans rack up huge unsecured debt.
You and I are going to end up bailing these people out eventually if they default, by paying higher fees for things that we use responsibly.
I’m sorry, but if someone has an emergency and needs a car repaired, they could dip into their savings to fix it, charge it (and pay it back at payday), or take a bus, get a ride from a friend, ride a bicycle, take a taxi.
Come on, we know who this 360% interest is targeted at – exactly those who can’t afford it.
August 13th, 2008 at 5:34 amJeff, if they had savings? They wouldn’t use these loans and we will be bailing them out much sooner with the way things are heading…
August 13th, 2008 at 10:19 amI guess we look at this slightly differently. I believe you are saying that desperate people need an option. I agree. I just don’t agree that desperate people should be taken advantage of – all in the name of a business making money. In my opinion, this is exactly what predatory lending is. Just because it provides someout a short-term out, they have been been victimized. And yes, stupid them for following the pied-piper into the water – but 360% is being a victim.
It’s a pay me now or pay me later. While I appreciate your compassion for those that need the money, quickly, I just disagree with how they are getting it. Digging a hole you can’t get out of is only making the problem worse. Compounding it with a company profiting on someone’s misfortune is just plain wrong.
August 13th, 2008 at 10:45 amJeff, I don’t disagree that getting into the hole that some do who over borrow and end up in a cycle of loans is an ideal solution. The reality of those I know who have done this, they don’t have an option. If they had overdraft protection, savings or a credit card that wasn’t maxed out, they’d use them.
It’s easy to say that people should save more, but there are a huge number of Ohioans living pay check to pay check and it can’t all be blamed on financial irresponsibility. Some do live above their means, but some have cut everything they can cut. When I did the coverage of the Income Self Sufficiency results for Ohio, it points out what is the root cause of some turning to these payday loans.
Even if I remove the banking lobby scenario as a motivation, I understand why some are targeting the payday loan industry. Yet unless we focus on our economy and the root causes? Having a bad safety net is better than no safety net at all.
August 13th, 2008 at 11:37 amMaking a profit is not a crime. When we start regulating the profit margins of competitive business we are in big trouble. The 391% doesn’t tell you the whole story because the smaller the loan, when you factor in a fixed fee the higher the A.P.R. will be.
A guy goes into a bar. (no this is not a joke) Orders a shot of liquor and pays $5 for a shot from a bottle the bar owner paid $15 for. If he can sell 15 shots from the bottle, his profit margin is 400%. In addition, a certain number of the customers don’t handle their liquor well. Government solution? Since the bar owner is taking advantage by charging an outrageous markup and many of the patrons come back too often leading to serious personal problems so let’s put a 20% limit on the markup and they have to sell shots for $1.20. Bar goes out of business.
Shutting down the bar isn’t going to solve the problem any more than closing the payday lenders. Education in personal finances and a government that doesn’t chase jobs out of the area will.
August 13th, 2008 at 12:00 pmThe difference is they guy that bought the $5 shot had the money in his hand to pay for it (probably).
As far as not regulating profits – have you read the papers lately? Greed and non-regulation are big factors in this entire subprime mess. How’s that going for you?
Are you familiar with naked shorting? Another little deregulation loophole that is biting people in the arse.
I’m not saying these are the only reasons – but if there was ever a business that does need some form of regulation, it is financial industry.
Some religions prohibit profiting based on loaning money. Money and debt are very, very slippery slopes.
August 13th, 2008 at 12:28 pmHow can we expect every day citizens to live within their means when our federal government can’t? Throw the bums out!!
August 16th, 2008 at 9:02 pmFrank Szollosi always seems to come out against people’s freedoms. Whether it’s smoking a cigarette or borrowing money it seems he wants to tell you what you can or cannot do. No thanks Frank!
August 24th, 2008 at 3:32 pm