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"Pay day" loans exacerbate housing crisis
CLEVELAND (Reuters) - As hundreds of thousands of American home owners fall behind on their mortgage payments, more people are turning to short-term loans with sky-high interest rates just to get by.
While hard figures are hard to come by, evidence from nonprofit credit and mortgage counselors suggests that the number of people using these so-called "pay day loans" is growing as the U.S. housing crisis deepens, a negative sign for economic recovery.
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In the Union Miles district of Cleveland, which has been hit hard by the housing crisis, all the conventional banks have been replaced by pay day lenders with brightly painted signs offering instant cash for a week or two to poor families.
"When distressed home owners come to us it usually takes a while before we find out if they have pay day loans because they don't mention it at first," said Lindsey Sacher, community relations coordinator at nonprofit East Side Organizing Project on a recent tour of the district. "But by the time they come to us for help, they have nothing left."
Today, throughout Ohio, payday lenders are exploiting more than 300,000 low to moderate income individuals by charging them rates of up to 391% on a typical $300, short term loan.
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The payday lending industry traps borrowers into a cycle of debt. The typical borrower takes out some 12.6 loans per year. Meanwhile, increased demands are placed upon our hunger programs and emergency services.
Our state permits these transactions because of a 1995 Ohio law that exempted payday lenders from the state's usury laws.
Some members of the state legislature are working toward a solution: HB 333 (Batchelder-Hagan) in the house, and the Senate Companion bill sponsored by Tim Grendell.
Highlights:
- Cap interest rates on small loans at 36%
- Establish a maximum number of loans per customer per calendar year
- Provide great incentives for companies licensed under Ohio's Small Loan Act to offer small cash installment loans of less than $800 as an alternative to payday lending.
Let them know you stand with them.
Add your name to a list of Ohioans who are concerned about the negative impact of payday lending on family life, our communities and the economy of the State of Ohio.
Lending should help build a future, not destroy it with triple digit interest rates and a downward spiral of debt. Ohioans should have access to short term, small loans that charge reasonable interest rates and allow for a borrower to make installment payments.
The practices of payday lenders constitute a modern day form of usury.
Instead, Bob Hagan does nothing but collects time sitting in the Ohio house waiting to collect his pension.
It's time to sent a State Representative to the 60th district that will be renewable energy jobs to Ohio.
Dennis Spisak-Independent Green Party Candidate for state representative-60th district
campaign website Http://votespisak.tripod.com