ProgressOhio

While disputing the factual 391% APR interest rates of their loans and the existence of the debt trap for hundreds of thousands of Ohioans, the payday lending industry regularly suggests that their product prevents economic hardship. There is endless evidence that the majority of payday loan borrowers end up caught in a cycle of debt as a result of the exorbitant interest rates charged and the ease of access to these predatory loans.

Check out the payday lending study by Brian Melzer of the Northwestern Kellog School of Management. The study is called "The Real Costs of Credit Access: Evidence from the Payday Lending Market:".

Here's the abstract:

"I estimate the real effects of credit access among low-income households by exploiting geographic and temporal variation in the availability of payday loans. The empirical design isolates variation in loan access that is uninfluenced by store location decisions and state regulatory decisions, two factors that might otherwise correlate with economic hardship measures. I find no evidence that payday loans alleviate hardship. On the contrary, I find that loan access leads to increased incidence of difficulty paying mortgage, rent and utilities bills; moving out of one's home due to financial troubles; and delaying needed medical care, dental care and prescription drug purchases. Through further analysis of differences in loan access - over time and across income groups - I rule out a number of alternative explanations for the estimated effects."

Here is another great quote from the report: "In the main analysis, I find no evidence that payday loan access mitigates financial distress along the dimensions that I observe. In fact, I find that loan access leads to important real costs, as reflected in increased likelihood of difficulty paying bills, moving out of one's home due to financial difficulties, and delaying needed medical care, dental care and prescription drug purchases. The magnitudes of these effects are considerable. I estimate that among families with $15,000 to $50,000 in annual income, loan access increases the incidence of difficulty paying bills by 25 percent and moving out of one's home by 60 percent. I also find that among adults in these families, loan access increases the delay of needed medical care, dental care and prescription drug purchases by roughly 25 percent."

So, it seems yet again that payday lending only exacerbates financial distress for families and when our economy is in turmoil, a 391% APR payday loan is just about the last thing we need! That's why a YES vote on Issue 5 is so important. We need to ensure that families and individuals who need access to short-term credit aren't burdened with excessive interest rates that make it much more difficult for them to meet other important needs.

You can read the entire report here:
http://home.uchicago.edu/~bmelzer/RealCosts_Melzer.pdf

Vote yes on issue 5!