28 Oct Payday Lenders Support Ballot Initiatives
Payday lenders and their lobbying arms are supporting ballot measures in Ohio and Arizona, two hotbeds of payday lenders, which would rollback recent laws passed in those states that regulate the payday lending industry. The Wall Street Journal reports that payday lenders are spending millions to back ballot measures to challenge consumer-friendly restrictions on the industry.
Ohioans for Financial Freedom, the payday-lending industry’s group in the state, has spent more than $16 million on the initiative there, compared with $265,000 by their opponents, according to campaign-finance filings with the Ohio secretary of state. The group has used the money on ads and mailers promoting payday lending and on a signature drive to put the initiative on the ballot.
In Arizona, the wording of the ballot initiative suggests it would impose further regulation on payday lenders; in fact, it would roll back much tougher rules. Yes on 200 is promoting the initiative with a counterintuitive strategy: spending money on ads that depict payday lenders as unscrupulous. One ad says, “Arizonans agree: Payday lenders who rip off hard-working Americans need to be stopped,” and asks voters to support the ballot initiative.
Yes, that’s right–they are relying on voters (who, by the way, are also paying millions to conduct the voting on these ballot measures) to save them from the legislature, who, representing the voters, passed the regulations. All in the name of “financial freedom,” they say.
Let’s talk about the “financial freedome” afforded someone who takes out a payday loan. Let’s call him “Joe Six-Pack,” and let’s say the loan is for $300, and the interest rate is 365% annually, which is about average where I live. (The Wall Street Journal says the national average is 391%, if you can believe it.) Joe took out the loan last Friday. Next Friday, he has to pay $345 to pay it back in full. If he can’t do that, he can just pay the interest, of $45, but he still owes the $300. And he has to pay another $45 in two more weeks, and so forth, and so on. At the end of a year, he will have paid $1170 in interest, but he still owes the $300. And, chances are, if he didn’t pay back the $300 right away, he’s had to get another loan to make up the shortfall caused by paying the original lender $45 every two weeks, and so forth, and so on. And when Joe can’t pay, the payday lenders may just deposit his check anyway, causing him to incur bank fees or bounce other checks, and generally setting off a domino effect that never seems to end well for Joe.
Is anyone surprised that the industry is playing fast and loose with it’s advertising support for these initiatives? It would be funny if it didn’t make my stomach hurt. Trust me, this industry is not in it to help you out in a financial pinch. They are in it because you will end up paying them a lot of money. They ARE the financial pinch.
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