Group targets payday lenders
Friday, December 14, 2007
The best way to end the payday lending trap for low-income borrowers is to enforce a interest rate cap of 36 percent, the Center for Responsible Lending said in a study released Thursday.
The study, Springing the Debt Trap, comes out just as Ohio lawmakers begin debate on three competing bills on how to best regulate the payday lending industry.
Payday lenders charge $15 to borrow $100 for two weeks. They accept a post-dated personal check as collateral. If the borrower can't pay it off in two weeks, he often renews the loan and pays another fee.
The fee can add up to an annual rate of 390 percent.
State Rep. Ross McGregor, R-Springfield, is sponsoring House Bill 337, which is favored by the payday lending industry. It would limit bounced check fees to one per loan, require lenders to offer extended payment plans and establish a task force to study how banks and credit unions should make loans to people with bad credit.
State Rep. Tyrone Yates, D-Cincinnati, is sponsoring House Bill 358, which would limit interest rates to 25 percent APR, prohibit additional loan origination fees and limit bounced check fees to one per loan.
State Reps. Bill Batchelder, R-Medina, and Bob Hagan, D-Youngstown, are sponsoring House Bill 333, which would adopt the 36 percent APR cap recommended by the Center for Responsible Lending. It would also prohibit loan origination fees, limit bounced check fees to one per loan, ban loans to borrowers with outstanding loans with any other check-cashing business in Ohio, and create a statewide database lenders must check before issuing new loans.
Uriah King of the Durham, N.C.-based Center for Responsible Lending said national chains often close their payday lending stores in states that adopt a 36 percent APR cap. But he maintained that low-income borrowers in those states found other, more affordable loans through credit unions and banks.
King found that in states with weaker regulations, 60 percent of payday loans go to borrowers with 12 or more transactions per year and nearly 90 percent of repeat payday loans are made shortly after a loan was paid off.
Source : http://www.daytondailynews.com
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