What do you think about Issue 5? Anyone? Anyone? (Cincinnati: insurance, good credit)

[gentlearts]

I am conflicted.
If you don't know, this issue is about the government limiting the amount of times a person can get a loan from one of those odious payday loan places-which charge up to 300+% interest, and they will do this by monitoring people's loan transactions.
My dilema: Payday loan places= BAD (so I should vote yes?)
The government monitoring ANYTHING=Bad (so I should vote no?)

I'm pretty sure I'll vote no.

[SimpkinsInsurance]

My vote is no. Government has no business telling someone how many times they should do anything. It's the person's right to be dumb and pay that interest that many times. That's a move against freedom to regulate such a thing.

[aquila]

Well, admittedly I don't like the idea of that kind of government intrusion into the private affairs of people's lives. However, I would be all for the government regulating the maximum interest rate these places can charge.

[gentlearts]

Originally Posted by aquila

Well, admittedly I don't like the idea of that kind of government intrusion into the private affairs of people's lives. However, I would be all for the government regulating the maximum interest rate these places can charge.

I think there is also a provision in the Issue to limit the interest rate. I don't know why they couldn't just do that instead of making part of the Issue something that is objectionable to so many people.

[Crew Chief]

I also find myself conflicted by this issue. On one hand, a large percentage of the "payday loan" customers have a track record of handling their finances poorly. Which means that providing financial services to them is far riskier than making loans to people with good credit and good collateral. And, if you listen to such media outlets like WLW 700 AM radio, they never met a business they didn't like. I'm with you all that think the government shouldn't be in the business of setting prices and rates.

On the flip side, the interest rates these lenders charge, in many cases is VERY high compared to conventional banks and credit unions. I know P.T. Barnum said "There's a sucker born every minute", but taking advantage of people whose financial skills aren't the best leaves some ethical questions...

Besides, government doesn't seem concerned about some of the tactics banks use to extract extra revenue from their customers (i.e. cashing larger checks before smaller ones so that the chance of you exceeding your balance is greater and they can charge overdraft fees...)

If payday lenders go away, it'll reduce options some people have for access to money. I really don't know how I'll vote yet...

[chance2jump]

Having previously worked for a payday advance company (privately owned chain in Lansing, MI area), I have a different perspective than most because I've seen the "inside" of the business.

Payday advance places are legalized loan sharking. They exploit the inability for one to take better care of his / her finances, they exploit an addiction, what they offer does lead to a high bankruptcy rate, they do not give anything in return to the community that so graciously hands over their paychecks, and a lot of them really don't treat their own workers with two hoots of consideration while they are getting high on their own hog.

The initial concept of payday loans is a great idea. Yeah, sometimes those that have to live paycheck to paycheck do get in a huge problem with s*** hits the fan. I personally just loaned a good friend some cash because of this exact situation. Paycheck is barely enough to cover the normal bills, but what happens when an emergency comes up?

Problems are:
1. it NEVER is just one loan. You need $200. PDA will charge you $33 for that $200 on your next payday. No problem, right? But, what if your next paycheck is already eaten up.. how are you going to pay that $233 in addition to your normal bills? You can't. You have to take out yet another loan. The customers I helped while working at the PDA place were always return customers. Many of them had been customers of this particular PDA store for YEARS.

2. PD advances are the same addiction as gambling. You can spend next weeks paycheck before you even earned it! WOW! Once someone who has a well established habit for PDA, the stores encourage those customers to borrow more and more and more. They will sometimes give out up to 75% of a person's normal paycheck. AND most PDA customers are working with multiple stores! I have seen customers rush down Saginaw Hwy bounce from store to store on their payday... paying off last week's cash advance and taking out a new cash advance. If each store will allow a person to borrow anywhere from 25% - 75% of their paycheck (up to $1000-1500 every 2 weeks!), each charging an outragious fee, how long before this gravy train derails?? I cannot tell you how many customers ended up in bankruptcy because this habit / addiction was not controlled. And, to boot, PDA has you write out a check for the amount you're paying back, right? If you don't pay back your loan, they cash your check. If the check doesn't clear, they go after you for fraud because you wrote them a bad check.

3. so, aside from being their for the occaional emergency moneytary assistance and offer low paying CSR jobs... what exactly are this companies offering our communities?
--> most do NOT give back to the community for sponsorship or support
--> most do NOT offer education or promoting better financial management
--> most don't even offer suggestions on how to get out of the PDA addiction or help "wean" customers off their loans

4. Shady business = shady business keeping. This may be my personal experience, but I do not doubt it would happen in other chains. If any of you have ever handled a cash drawer, you know a CSR rep can sometimes come out short on money. I had an instance where I was $50 short. When you handle literally THOUSANDS of dollars coming in and going right back out, a mistake can happen. In my instance.. I suspected the customer snatched a fifty off my desk right after I counted the money and then a coworker called my name and I looked away briefly. My personal chain would "charge back" any funds you were short on, meaning they would deduct it from your paycheck. I was basically backed into a corning and told "company policy says you must sign this authorization to deduct it and if you don't sign, you're in violation and subject to being terminated." I refused to sign and basically told my manger's supervisor she could stuff the job where the sun didn't shine. A long with the auth for them to deduct the missing funds out of an employees paycheck, they also did all the necessary paperwork so that IT COULD ALSO BE REPORTED AS A LOSS ON THEIR TAXES! This is double dippin and shady as heck. But, they aren't regulated anywhere else, so who's keepin' track?

5. Honest small business ownership where you work for the community, provide a LEGITIMATE service or goods to the community, and offer decent jobs is fantastic. I will not criticize any persons who really, truly work for their fortune and really earn the good fortunes they gain in return. This is always subject to opinion, of course; while I personally think folks should live within moderation and give back to the community, others see (and do) differently. However, PDA is legalized, unregulated loansharking. There is not even an ounce of "give back to the community" in the system. They take, take, take and kick ya to the curb when your train wrecks. The owner I worked for had only 4 branches in the mid-MI area. After all overhead, payroll, insurance, etc, etc needs were met for ALL the branches, it was figured out that this owner made $280,000-300,000 per MONTH off Lansing's inability to be financially responsible. I'm sorry, but I find that disgusting and morally corrupt. Because this owner was living pretty f'g hefty on the hog ... while not giving anything back to the community and not providing any type of service to get the addiction under control. Meanwhile, he actively promoted more and bigger loands which ultimately throw many customers into a tailspin that headed to bankruptcy (which then cost TAXPAYERS money - they lose their house, property, etc and we have to pick up the tab). Just like a drug dealer .. your first hit is always free and you're always offering more to your junkie. ("New customers - 50% off your loan today!!"; "Mrs Smith, you have been a great long time customer - we just up'd your limit from $600 to $800!").

I am personally voting in favor of this bill. Regulating this shady business is long over due and its about time to do something about it.

[aquila]

Thank you for your insights. Perhaps I'll vote for this bill after all.

[Crew Chief]

Chance2jump, MANY thanks for your post! You gave us insight into an industry that few who don't use it understand! I spent a good deal of time thinking about it as I drove last night. I listen to the "talking heads" on AM 700 WLW (Cincinnati) talk about how Issue 5 will kill jobs in Ohio and how these people will have no other recourse if these payday loan places go out of business and how those people that don't even use payday loan companies don't know what they are talking about...yada, yada, yada.

But I think limiting the interest rate (in this case, anyway) is just a decent thing to do. I truly believe few, if any, payday loan places will close if they are limited to charging 28% interest. Heck, the credit card folks have been doing it for YEARS and they seem to be doing quite well, thank you very much. Yes, I agree with Conservatives that price-fixing is, in most cases, a bad idea. And I'm all for operating a business and making money. But I'm beginning to wonder if "Compassionate Conservatism" is just a bunch of hooey. This issue, I believe is the perfect illustration that it is...

[Cosmic]

This is not so much about payday type loans. It is more about a very slick system that seeks to mine the poor, especially in being able to turn every type of debt into a high interest bearing loan.

In many cases these are the huge national banks that are actually the backers of such schemes. There are a number of the scam companies that operate by selling franchises, they all have the same goal. Skining the poor, many times they are not even aware of what is happening.

Example, they have succeeded in many cases, making a hospital bill into a loan. Back up a bit, a very poor person has no medical coverage, they are sick, go to the emergency ward for treatment. The hospitals then attempted to collect, usually as an over due bill. It may or may not have goten paid but only the amounts in question where in dispute.

Fast forward, these slick companies like JDB have gone to the hospitals, gotten them to change policies. Today anybody who can not pay via insurance must sign a form that agrees to authorize a loan. The loan company pays the medical bill and commences to treat the amount as a very, very high interest loan. Basically they can and will take anything the poor have or ever will have. They can and do seize all sources of income or wealth.

As I understand the State of Ohio position, they want to first start to limit the terms of any of these types of loans and then have a system in place that allows them to monitor the activities in all its different forms. Probably with some strong teeth if there is a continuing pattern by particular organizations. So this is not about consumer freedoms, it is more about a particular type of greed and being able to operate well under the radar. The reporting system is not aimed at tracking what any individual consumer is doing. Those ads about limiting the number of loans are bogus. They may outlaw a lot of super dangerous destructive practices that loan companies might prefer but would in fact be illegal if certain rules are put ino place. The consumer is not being turned down for a loan, under any reasonable system they never qualified in the first place.

This really is about a certain type of consumer protection. One feaure of that is having a database about exactly what is occurring and being able to draw efficient conclusions about business practices and how they may or may not being conduced. It might also give a handle about holding them criminal in certain cases if they ignore or misrepresent their activities. The monitoring aspects are not about individual cases but patterns and being able to use data to understand practices.

Basically all the ads being run on TV are super dishonest. The State is spending almost no money to tell their side of what is being proposed. The TV documentary channel has had some long programs on what is happening. It basically is a sort of free market idea to allow a business to strip mine the pockets of the poor in so many ways, many of those is a form of bill collection, where a debt is turned into a super high interest loan without a real knowledge being extended.

Difficult to protect a fool from being his own worse enemy but certain lending practices should be outlawed. A vote YES is a small attempt in that direction.

The right to credit is not an absolute. The strip mining practices against the poor does not basically consider risk factors. It does not consider leaving enough money in their pockets to even live. Many poor folks should not have any right to credit, especially when any reasonable analysis of their incomes shows they have zero excess capital to pay any form of interest. In its most gut level, loans to the poor is really nothing more than a form of slavery. Bondage with the force of the law behind it.

The practices do not assist or help the individuals, in far to many cases it destroys any chance they might have to make a go of it financially. You can argue about the role of government. But one thing is for sure, severe methods that take the funds of individuals in almost cruel ways would be surely regulated and controlled by some means. A start is to better define the rules for lending and the amounts of interest that can be extracted to cover any such loans. The entire idea of credit needs to be rethought.

Especially the idea of being able to change billing practices of critical type services and have them sold to third parties in pretty sorid circumstances if immediate cash payment is not made on the spot. The government does have an interest in not creating an ever growing class of destroyed individuals who can never support themselves.

[chikaranotori]

chance2jump, i was already voting in favor of this bill (for many of the same reasons that you stated), but you definitely stated all of the reasons very well. hopefully, others will read and come to the same conclusion.