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The payday lending industry's lobbying message is clear, “Payday advances should be used for short-term financial needs only, not as a long-term financial solution.” But their goal, in fact their very survival, requires that they pull their occasional customers into a cycle of repeated loans over the long term. Never mind that the customer’s original intent was only to borrow a reasonable sum and only until their next payday.
The reports from publicly owned payday lenders reveal the dimensions of Ohio's payday lending industry and the extent to which customers become ensnared in repetitious loan transactions. These repeat payday borrowers drive the payday loan business model and finance the alarming expansion of payday storefronts across the state.
In this report we find that:
- Ohio payday borrowers pay over $318 million in payday loan fees annually
- The average payday loan is $328 with an average APR of 391%
- The average Ohio payday borrower takes out 12.6 loans per year;
- Over 300,000 Ohio payday borrowers are ensnared in a payday debt trap1
- The payday lending industry actively encourages repeat borrowing and is dependent upon its ability to lure most of its customers into this devastating debt trap.
The payday lending industry's survival requires that it lead most of its customers into a wave of successive two-week loans. This is a particularly oppressive form of highinterest lending, and damages all of Ohio’s residents.
Ohio’s usury laws were amended in 1995 to specifically enable payday lending to Ohio's citizens at triple-digit interest rates. A decade later, it is clear that the exemption for payday lenders was a mistake.
This study from the Housing Research & Advocacy Center and Policy Matters Ohio analyzes data on Ohio payday lending locations from the Ohio Department of Commerce, examines family budgets, and uses information gathered by shoppers at payday loan locations. The study updates findings from last year, which reported on the previous decade's data.
Among the data:
- The number of payday lending stores licensed in Ohio increased from just 107 locations in 1996 to 1,638 locations in 2007, growing by a multiple of more than fourteen. There were 76 more payday lenders in 2007 than 2006, a 5 percent increase.
- In 1996, payday lenders were concentrated in urban communities. Payday lending has since become a much more ubiquitous part of the overall Ohio landscape. All but two of Ohio's 88 counties now have at least one payday lender, and 41 counties, seven more than last year, had more than ten lenders. On a per capita basis, 68 counties had more than one payday lender per 10,000 people.
- Franklin (189), Cuyahoga (163), and Hamilton (125) counties each had well over one hundred payday lenders in 2007. These three counties represent more than 30 percent of Ohio's payday lending stores.
- Large urban counties have the most payday lenders in absolute terms, but less populated counties have a greater number of lenders per capita. Of the ten counties with the highest concentrations per capita, not one is a large urban county. Belmont County had the highest concentration, with 3.56 lenders for every 10,000 people. Washington and Gallia counties ranked second and third with 3.00 and 2.57 per 10,000 people.
- Most payday lending locations in Ohio are chains or franchises. The two most common locations are Advance America (177), Cashland Financial Services (144), and First American Check Advance (111) with more than 100 locations each.
- Testers visited 36 total payday loan sites in Franklin and Cuyahoga counties, finding that all locations charged the maximum rates allowed by law. In several stores, staff was unable to explain what the annual percentage rate meant for a payday loan.
- An anlaysis of basic budgets for low- and moderate-income families demonstrates the near impossibility of a family paying off a $300 loan in two weeks' time, contributing to the cycle of debt many families face.
Dennis Spisak-Independent Green Party Candidate for State Representative for the 60th District
campaign site: Link
Later in the article, he says, "[t]he nature of freedom of choice is that some people will misuse their responsibility and hurt themselves in the process. We should do our best to educate them, but without diminishing choice for everyone else."
This is how we need to look at this topic. Leave the payday loan stores alone and look for other options. Instead of taking away payday lenders, beat them at their own game by giving consumers even more alternatives!