Tuesday, September 30, 2008

'No on Issue 5' press conference today

COAST, Coalition Opposed to Additional Spending and Taxes, will be in Toledo this morning for a press conference against Ohio Issue 5, the 'payday lending' law.

Jason Gloyd, chairman of the Cincinnati-based anti-tax group, will be at the Lucas County Courthouse property at 10 a.m. to urge citizens to reject the recently passed law because of the intrusive government intrusion into private lives that it contains.

The current ballot language for Issue 5 reads:

STATE ISSUE 5
Referendum – REFERENDUM ON LEGISLATION MAKING CHANGES TO CHECK CASHING LENDING, SOMETIMES KNOWN AS “PAYDAY LENDING,” FEES, INTEREST RATES AND PRACTICES

Substitute House Bill 545 (H.B. 545), which was passed by the Ohio legislature and signed into law by the Governor, substantially changed the law regulating how certain lenders in Ohio operate. Under the referendum, voters must decide whether Section 3 of H.B. 545 should go into effect.

Section 3 of H.B. 545 deletes the old provisions of the law regulating check cashing enders, sometimes known as “payday lenders,” in favor of the new provisions.

1. If a majority of Ohio voters approve Section 3 of H.B. 545, all short term enders, including check cashing lenders, would be subject to the following imitations:
• The maximum loan amount would be $500;
• Borrowers would have at least 30 days to repay the loan; and
• The maximum interest rate would be 28% annual percentage rate (APR) on all loans.

2. If a majority of Ohio voters reject Section 3 of H.B. 545, check cashing lenders ould be allowed to continue under previous law as follows:
• The maximum loan amount would continue to be $800;
• There would continue to be no minimum repayment period; and
• Check cashing lenders could continue to charge rates and fees, resulting in a total charge for a loan that substantially exceeds an equivalent APR of 28%.

A “YES” vote means you approve of Section 3 of H.B. 545, and want to limit the interest rate for short term loans to 28% APR and change short term lending laws.

A “NO” vote means you disapprove of Section 3 of H.B. 545 and want to permit check cashing lenders to continue to be able to offer short term loans as currently permitted.

A majority “YES” vote is required for Section 3 of H.B. 545 to be approved.


The interest rate that can be charged is the major component of the bill, but there are other provisions in H.B. 545 that give the government intrusive control over aspects of our lives - onerous "big brother" provisions are not even listed as part of the ballot language.

If Issue 5 passes, the state government will create a data base to keep track of who gets payday loans, how much is borrowed and when. Prior to giving out loans, the payday lenders must check the state's database to see if the recipient is 'eligible.'

Yes, that's right - the state gets to say whether or not you can have a loan.

How do they know if you're eligible? According to the law, you can only get four payday loans in a calendar year.

You can have two payday loans within a 90-day period of time, but if you try to get a third loan in that time frame, you are denied, until you take a 'financial literacy class.'

Yep - if you're taking out such loans you obviously need the government to educate your about financial issues...never mind that the individuals most in need of financial education are the very lawmakers who passed this bill.

You also can't get a loan if you already have loan with that lender - or if you have 'more than one outstanding loan,' if you've paid off your loan on the same day you're taking out a new one, or if you're planning to use the loan to pay off another payday loan.

And then the law restricts how much you can borrow:

If the loan would obligate the borrower to repay a total amount of more than $500 to licensees, or indebt the borrower, to licensees, for an amount that is more than 25% of the borrower's gross monthly salary not including bonus, overtime, or other such compensation, based on a payroll verification statement presented by the borrower;

Since when is it the role of the government to track what you borrow, when and how much? Since when is it the role of government to tell you how you can use the money you borrow? Since when is it the role of the government to decide whether or not you need or should take a class in finances? Since when did Ohioans think it was okay to grant government this kind of intrusion into our daily lives?

Even if you think payday lenders should be restricted by state law to certain interest rates, how can you possible approve of giving the government such authority over peoples' lives?

If Issue 5 passes, it will result in a loss of jobs in Ohio, and it's not just the ability to charge a higher interest rates. I don't think any business would approve or support the restrictions placed on the payday lenders when it comes to collecting what they're owed.

The government can charge the payday lenders for accessing the database - a fee that will probably be passed along to the borrowers. so that's another 'tax' on businesses.

Usually, when a business deposits a check and that check bounces, they'll put it through a second time. They may pursue court action, as well. But payday lenders, under this law, cannot do that.

The law prohibits lenders from re-depositing a bounced check unless they first get written permission from the borrower to do so. They also can't bring or threaten to bring court action against the borrower if their payment is refused or returned for insufficient funds. The only way they can pursue such action is if they can prove the borrowed intended to defraud the payday lender by closing their bank account, or giving false bank account information, in order to avoid payment.

If you're a business owner, would you agree to such terms being dictated by the government?

Many loans have pre-payment penalties. Payday lenders, however, would not be able to use such terms. Also, under the new law, they couldn't include a contract provision to automatically deduct funds from your account or bill your credit card for payment on an agreed-upon date. If they violate these restrictions - restrictions other businesses in Ohio are allowed to utilize - they're subject to criminal charges.

Any debt collectors hired to collect unpaid loans also have significant restrictions placed upon them. When people don't pay their bills, they often don't want to be 'found' by debt collectors. So if a collector calls another other than the borrower to gather information, they cannot reveal that they are calling because the borrower owes money.

If someone called my house looking for one of my relatives and wouldn't tell me why they're calling, I wouldn't give out any information - would you????

They also can't communicate by post card or include anything on an envelope that indicates the contents relate to a debt. And if you don't this debt collector to contact you, the law has provisions for that as well:

If a borrower provides written notification, to a licensee or a debt collector, that the borrower refuses to pay a debt or that the borrower wishes the debt collector to cease further communication with the borrower, the act prohibits the debt collector from communicating further with the borrower with respect to the debt, except:

(1) To advise the borrower that the debt collector's further efforts are being terminated;

(2) To notify the borrower that the debt collector or licensee may invoke specified remedies that are ordinarily invoked by such debt collector or licensee; or

(3) Where applicable, to notify the borrower that the debt collector or licensee intends to invoke a specified remedy. If such notice from the borrower is made by mail, notification is complete upon receipt.

Who would accept such a collection contract under these terms and conditions? It almost assures failure in the effort to get the loan repaid.

With such onerous restrictions on borrowers, lenders and the collections, would it make sense for these businesses to continue to operate? Many say no and are planning to close, laying off their employees, if the referendum passes.

Of course, credit unions are probably very happy about this law. Under the terms, they get subsidized by our tax dollars, through a linked deposit program, to give our short-term loans. This is intended to replace the 'option' payday lenders are currently providing, but the terms are not as conducive, requiring a loan that is at least 90 days in length.

This law is anti-business, anti-consumer and 'Orwellian' in its provisions. As I said earlier, even if you agree with the interest rate component, how can you possibly approve of giving the government this kind of control over decisions which should be yours - and yours alone?

We need to vote NO on Issue 5.

13 comments:

Steve said...

It’s really unfortunate that COAST continues to assist the payday lenders in their efforts to deceive Ohio voters. Most of us have already had an opportunity to view the Ohio payday lobby's new misleading ad about the "Big Brother" that is going to enforce Ohio's new 28% APR rate cap and 4 loan limit that prevents consumers from getting caught in the debt trap. What the payday lenders and COAST fail to mention (again and again) is that they have their own "Big Brother.” The payday lobby’s ad equates to pure hypocrisy and fear baiting. What the database provision of House Bill 545 is supposed to do is ensure that payday lenders comply with the law. However, payday lenders would simply rather not comply with the law!

Further, the payday lenders use a tool called Teletrack to keep tabs on their consumers. Below are some nice bits from a Teletrack brochure detailing the great information they can gather for you if you are a payday lender:

"When you use Teletrack, you gain Actionable Intelligence!"

"For each individual loan, Teletrack supplies the name of the lender, date opened due date, reported date, date paid and original loan amount, including fees…With this information, you are able to see the complete credit cycle from inquiry to loan."

"As an add-on to your standard service, our bankruptcy information provides you with a powerful new tool to help increase predictability so you can serve more consumers. Teletrack provides you with all the relevant bankruptcy case details you need to assess an applicant's ability to complete your organization's financing terms."

"Teletrack has multiple databases to help you with everything from up front risk mitigation to back end skip tracing:"

Open Loans
Previous Inquiries
Consumer Identification Database
Bankruptcy Information
Landlord/Tenant Court Records
OFAC SDN List
MICR Data

And just in case that wasn't enough for you, "Teletrack is constantly evaluating and testing new data sources." Apparently COAST feels pretty good about the payday lenders have access to all kinds of information about you: where you rent, when you paid your rent, if you've filed for bankruptcy, what your assets are, etc.

Don’t fall for the deceptions of the payday lending industry and their misguided allies like COAST. Vote Yes on Issue 5 for true financial freedom and lower interest rates!

Lisa Renee said...

Thanks for posting this, I linked you on Glass City because I think this information is very helpful in trying to help people decide which way to vote on Issue 5.

YesOn said...

Get the full story on Issue 5: http://www.yesonissue5.com/index.html.

Don’t buy into the false arguments of the payday lenders! They’re misleadingly Ohioans by preying on their fears about job security and government intervention. Their Astroturf front group, Ohioans for Financial Freedom, has put out two ads that the Cleveland Plain Dealer has given a “2 out of 10” on the truthfulness scale. Enough is enough.

A ‘yes’ vote on 5 would help hardworking Ohioans by lowering the interest rates on payday loans to 28% APR. A ‘no’ vote would mean more of the same 391% APR

Maggie Thurber said...

Lisa - thanks so much! I'm still concerned that only three lines describe this law, conveniently omitting the restrictions on the borrower.

Tim Higgins said...

So government would like to keep track of those who lend and those who borrow, and would like education and oversight on such practices. This would be laughable if it were not such intrusive behavior.

When has the state shown any wisdom in lending?

When has it shown the ability to live within it's means?

When has it shown any ability at money management?

Without redirecting funds from areas like the tobacco settlement, without the ability to increase income by "stealing" from taxpayers, without running deficit spending like a drunken sailor (no offense to drunks or sailors), the state would be considered the worst of offenders. How then could this professional "check kiter" hope to teach anyone what to do with their money?

Maggie Thurber said...

YesOn - I didn't quote anything from the group opposed to Issue 5 - I quoted the ballot language and then added my own analysis.

If you're going to quote some paper about the truthfulness of ads, you might want to check the accuracy of your own statements.

No payday lender collects 391% APR. In fact, there is no way possible under the CURRENT law for this to happen since CURRENT law prohibits payday loans that are longer than 6 months. There's no way a person actually pays 391% APR, because no loan is for a full 12 months.

You did not refute any of the arguments I made (note - me! Not the payday lenders).

Furthermore, a vote on this new law should be based upon the ENTIRE law and not just a single provision that sounds good in a sound bite.

If you want to actually comment upon my post and the entire contents of the bill, please feel free to do so. However, if you're just going to repeat the false arguments of the supporters and prey upon the fear of victimization (to paraphrase your own words), then your comments will be deleted.

Maggie Thurber said...

Steve - you incorrect assume that providing information to the government is the same as providing information to a potential lender as justification for a loan.

People won't prevent consumers' from getting caught in a debt trap.' Payday loans are not the cause of debt - bad financial decisions are. To think that the government needs to protect people from making bad decisions is the basic error in your statements.

While you're supposedly protecting some people from themselves, you are harming others who use payday lending as what THEY consider to be the best option for themselves. Who are YOU or any GOVERNMENT to tell them that a choice they think is best for them is now illegal because you fear they might abuse the priviledge???

That lenders utilize a database to help them in their businesses is not the same as government maintaining a database in order to determine if you can or cannot have a free choice of a loan.

The requirement of a government database is to ensure compliance with the law - agreed. But the law which says government gets to decide how many loans you can take out is a bad law that shouldn't require the government to track your private transactions.

You information about Teletrack is irrelevant to the primary point.

It's not the government's role or perogative to tell anyone that they are limited in the number of loans they take out - or to protect them from what they assume is a bad financial decision.

"There is no worse tyranny than to force a man to pay for what he does not want merely because you think it would be good for him." - Robert Heinlein

As for COAST not having any problems with the lender collecting all that data - I don't either - and neither should you. If a person voluntarily gives that information in order to obtain a loan, that's THEIR decision to make. Government will use the information to inject themselves into an area they have no business - that is, telling people how many loans they can have in a given timeframe and forcing a communist-style re-education camp for those who dare to do something the government thinks is bad for them.

If you think payday lenders and COAST is being deceptive, please explain why these provisions which most people object to are NOT included in the ballot language people will see when they go to vote. Nothing 'deceptive' there, now is there?

Finally, I allowed this post, but I do not allow anonymous comments - that includes attempts to hide identity by blocking profile information. You've been warned.

Lisa Renee said...

Maggie, I see in reading the comments that you've had some of the same visitors I've had. It's been interesting to watch them from both sides of the issue come and post their talking points. Very few bother to honestly reveal their connections.

:-)

Maggie Thurber said...

Yep, Lisa!

I wouldn't mind so much if it weren't just a regurgitation of the talking points - there's no independent thought coming from these people.

And that makes me very sad - you and I have our opinions on things, but those opinions are arrived at after careful consideration of all points - even when we disagree. :)

But we don't just swallow the spin hook, line and sinker...

A good debate based upon the law's language is necessary for people to make a good decision at the ballot. Too often, though, we're just left spining round and round, from one side to the other...

Oh well...we do what we can.

Chris said...

Payday Loans should be an accessible option for those that use and rely on them. The ability to manage ones own money should remain so. Let the consumers decide their course. Payday Loans can help save you when times are tough. That is why they are used by countless people in all walks of life.

Maggie Thurber said...

NOTICE:

* anonymous postings (and blogger profiles blocked) from outside the state will not be accepted

* advertisements for payday lenders are NOT comments and will be deleted

dtownjbrown said...

Maggie - thanks so much for positing this information. Until reading your blog, I wasnt sure what exactly the statewide database was for? I’m still undecided on this issue and your explanation of the many facets to “Section 3 of HB 545” was very helpful. Its terribly confusion to me and I find it difficult to consider Issue5 wholly and objectively.

For instance, I agree with lowering the annual percentage rate but not with limiting a borrower to only four loans per year. I like the idea of increasing the repayment period to 30 days, but not the lowering of maximum loan amount to $500 (after all, how much help could 2K/yr really provide an already struggling family).

Personally, I couldn’t fathom entering into yet another bad debt situation by taking out a payday loan since I find myself living from paycheck-to-paycheck already as it is (and I don’t even have a family to feed). Instead, I try to make arrangements with my current debtors by changing billing due dates, requesting forbearances, setting up payment plans, etc (but that's just me). Nevertheless, I can see how a payday loan service might benefit someone with a lower income, larger household, limited budgeting skills or less financial "education" than myself (which is why I favor the financial literacy aspect of the bill).

However, Im not sure that it is up to me to vote on another person's right to make their own choices? For the most part, I like the idea behind HB 545 but Im contemplating a NO vote in hopes that it will prompt the lawmakers to rewrite the bill to “better” protect those in need of payday loans without further limiting them?

Thanks for the info :-)

DazzleMea said...

Thank you for finally posting the truth about this issue!! I've been trying to do some research on it (to spread the word) and could not find in information I was looking for! I think though, that it's important to mention that the financial literacy class will cost you $250.

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