Vote yes on Issue 5

Vote yes on Issue 5

Tens of thousands of Ohioans have made payday lending a multi-million dollar industry. Dozens of storefront shops sprouted up in Mahoning and Trumbull counties in little more than a decade after Ohio legislators effectively eliminated the state’s time-tested laws against usury.

A law was passed in the spring — with surprisingly strong bipartisan support — in the Ohio General Assembly that would rein in payday lenders. The lenders themselves say that the law would destroy their industry. They accentuate this point by claiming that Ohio’s payday lending law would eliminate 6,000 jobs in those payday lending stores. It’s probably true that some jobs will be lost, but it is also very likely that many of the payday lenders will find ways to stay in business, even if they won’t be making the profits they make on loans that are now equivalent to 391 percent in annual interest.

Ohioans should recognize that payday lenders are an institution whose time has passed. They are a product of a laissez faire attitude that is supposed to reflect an enlightened view that we should all be free to make our own economic decisions — good bad or terrible — and free to succeed or fail on our own. We have the unhappy experience lately of seeing just how bad it can get when regulation is abandoned in favor of survival of the guy who can make the most out of deregulation.

Just say yes

When they go to the polls Nov. 4, Ohio voters will be asked to puzzle their way through Issue 5. It can be somewhat confusing because a yes vote retains the law that was passed in May. In effect, if you think payday loans are a bad idea, vote yes. If you think they’re a good idea, vote no.

The ballot will read like this:

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 percent 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.

We recommend voting yes. If this law is retained, Ohio will be among 15 states that have passed legislation outlawing short term loans at triple-digit interest rates. Congress has prohibited loans made to military personnel from exceeding a 36 percent annual percentage rate.

Our men and women in uniform and folks in those other states, including Pennsylvania, are surviving without payday loan stores in every strip plaza.

Big business

Supporters of the industry argue that payday loans are a valuable short-term lifeline for people who come up short from time to time. If that were true, the industry wouldn’t be making $50 billion — yes, billion — in loans a year.

Such an extraordinary amount of business reflects how easy it is for people living on the financial edge to fall into a pattern of going from payday loan to payday loan. When they do that, the cumulative interest they pay skyrockets.

A coalition of religious and social agencies have joined to support passage of Issue 5. We would point out to them that once the issue is approved, their work is not done. It is incumbent on them to do what they have said they intend to do: establish alternatives to payday lending that will make low-interest, nonprofit loans available to people under financial pressure.

Because sometimes people do need a hand — just not at interest rates that would have made a neighborhood loan shark blush.