Payday sharks take it on the fin
In case you missed it, another happy result of this week’s election was the defeat of two anti-consumer ballot measures in Ohio and Arizona that were pushed by the predators in the “payday” lending industry. Here’s a release from the Center for Responsible Lending:
“Ballot measures in Ohio and Arizona doom deceptive tactics and predatory practices
Ohio and Arizona voters saw through the deception of the payday lending industry at the ballot box Tuesday and voted to reject payday lending in their states, as the trade group used dirty tricks and misleading advertising to try to keep predatory 391 percent annual interest rates legal for payday loans.
Ballot propositions initiated by the industry, supported by over 30 million of their trade groups dollars, and featuring measures that prop up their predatory practices, experienced stunning defeats in both states, as voters recognized the deception in the industry and its advertising. Payday lenders outspent the Ohio grassroots coalition by over 60 to 1, and still lost by a 2 to 1 margin in the vote. In Arizona, the grassroots campaign was outspent about 90 to 1.
“These two citizens ballots are really a mandate for cracking down on payday lending throughout the nation,” said Uriah King, policy associate for Center for Responsible Lending. “You can get no clearer message than a huge majority of voters rejecting 400 percent interest loans. A reasonable two-digit cap is sensible, fair, and it works to keep bad apples out of the consumer lending arena.”
Combating millions of dollars of deceptive advertising, spirited grassroots campaigns in each state took on a national industry that depends on making high-interest loans repeatedly to customers who cannot afford to pay them off for good.
Payday loans are systematically converted into long-term, high-cost debt for working families. The average payday borrower has more than eight transactions per year, costing them more in interest than the original loan. Congress passed a 36 percent cap protecting military families from this practice, and 15 states plus the District of Columbia have chosen to control predatory lending by enforcing interest rates in that range.
Ohio’s new law had no sooner passed when the industry initiated a ballot measure that would have repealed the interest rate cap of 28 percent. Arizona’s current law exempting payday loans from the state’s 36 percent cap on small loans is due to expire in 2010, and lawmakers are unlikely to renew it given its negative impact on borrowers and the economy.
The failure of the payday industry to circumvent state lawmakers in Ohio and Arizona suggests not only that citizens are in the mood to crack down on irresponsible lending practices, but also that people are catching on to the deceptive practices of the industry.
The conventional wisdom for ballot measures is “when in doubt, vote no.” Thus the payday lending industry in Ohio had a big advantage by having the “no” vote. This is only the second time in history of Ohio referenda, established in 1856, that the ‘yes’ vote won, and victory in this bellwether state sends a strong message to policymakers everywhere.
In Arizona, the payday lenders tried to capitalize on the trend toward reform, going so far as to attack their own practices as unethical. Community groups, business leaders, political leaders of all parties, faith groups, military and consumer advocates endorsed the “No” vote, and news reports and internet bloggers helped spread the word that the reform was false.
Visit our Web site to learn more about the payday lending debt trap.