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What will become of all the payday lending businesses?
By Steph Greegor
“I’m waiting to see what happens,” he said. “And hoping I don’t run out of revenue.”
Ameribucks is a Franklin County payday lender that opened in December, 2005, and is one of 1,600 similar shops across Ohio that’s been accused by lawmakers of predatory lending practices by targeting those who are more susceptible to being trapped in a cycle of debt. To address the issue, House Bill 545 is going on the ballot in November’s general election and will cap the rate payday lenders can charge from a 391 percent annual percentage rate to 28 percent.
“Credit card companies have survived at 28 percent,” said Sandy Theis, spokeswoman for the “Yes on Issue 5” campaign. “There’s no way payday lenders can’t survive. I think the job-loss figures are exaggerated.”
Payday lenders are claiming that should H.B. 545 pass, creating a cap on the
“They approved it with the intent to put us out of business,” he said.
So what will happen to the payday industry if the bill goes through? Dudte says most will likely go belly-up and become more boarded-up remnants in sad strip-center sagas. Some, though—those with a broad client base—will try to diversify.
“We’re attempting to start a different business out of this business—a rent-to-own company, something that works with my customer base. If more companies go out of business, and they will, only the handful that stays will be successful.”
But Theis has a different theory about what may happen next. In her opinion, credit unions are the future of the payday industry.
“What we’ve seen in the
Stretch pay is the credit union’s payday loan alternative, according to Jeff Carpenter, vice president of membership and development at Wright-Patterson Credit Union. It was developed two years ago in Ohio and has spread to five other states: Michigan, Wisconsin, Maryland, Colorado and North Carolina. There are currently 28 locations that offer stretch-pay loans in Central Ohio.
“We tend to have a better deal,” he said. “In terms of specifics, with our product, you’re looking at one annual fee; with their product it’s $15 to $20 every time you borrow. We also have an 18 percent APR, which, on $500, is about $7.40.”
Carpenter said that credit unions, which, in the past, required members to be affiliated with a particular organization or profession, have broadened their membership base considerably. Carpenter said many credit unions, like Kemba Financial in Columbus, broaden their membership to include anyone who goes to school, worships or lives within Franklin County, giving many people options they didn’t have before.
“We have a totally different motive. We get to wake up and think about how we give back to our members,” Carpenter said. “Payday lenders get to wake up and figure out how to pay some stockholder.”
Dudte says his intention always was to help people, but the system was built to set people up for failure.
“If you don’t have customers always re-borrowing, you’re not going to make much money,” he said. “I did the best I could. I’d just love to find a buyer right now for my business.”
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John wrote on Sep 1, 2008 11:26 AM:
Unfortunately, these companies will find a way around the new laws as they are wont to do. "
Barb Smith wrote on Aug 29, 2008 8:10 PM:
Doctor wrote on Aug 29, 2008 2:03 PM:
There are too many people being hurt by predatory payday lending in Ohio for us to allow business to continue as usual.
I'm going to support the payday lending reforms by voting yes on issue 5! "
Jack wrote on Aug 29, 2008 5:41 AM:
Did you get paid for that? People are not smart enough to stay away from this place, that’s why our country is in the shape that it is. Your right though credit card companies do not have any overhead, they do not employ millions of people, own skyscrapers and thousands of feet of office space, produce the actual card, no, no overhead whatsoever.
Payday load industry needs to die. "
Mike Coleman wrote on Aug 28, 2008 5:49 PM:
Lam wrote on Aug 28, 2008 2:29 PM:
A 28% APR cap would cripple the industry. You can't compare it to a credit card because they don't have overheads such as store fronts, rent and store security. Certainly, you can't compare them to credit unions who are considered non-profit organizations.
Don't limit our financial options. VOTE NO ON ISSUE 5! "
Dave wrote on Aug 28, 2008 11:44 AM:
There is too much BIG BROTHER going on in country, people need to think for themselves.
Just another example of people who make bad choices and end up in a bad situation call foul and shift the blame to someone else and then the government has to jump in and regulate it.
After all, dont all the politicians have steriod to conduct?
DMS "
David wrote on Aug 28, 2008 9:44 AM:
The payday lobby has set up shop in Ohio in advance of November's election and has put their smoke & mirror machine into overdrive. They have petitioners on the streets lying to voters, telling potential signers that the referendum will actually "lower interest rates." The payday lobby also has ads up on television, suggesting that Ohioans need all the freedom and choice that 391% interest has to offer!
I say this is going way too far! 391% interest is not freedom. The industry needs to reform its predatory practices and offer a safe, fair product to Ohio consumers. VOTE YES ON ISSUE 5 for lower interest rates! "
tlh wrote on Sep 11, 2008 9:31 PM:
Secondly the people who use payday advance companies aren't poor. You would be suprised to see your child's teacher or principal, the minister of your church, your dentist, your lawyer, the police officer who wrote you a ticket last week.
The government needs to stay out of our business. We work for our money and should have the RIGHT TO CHOOSE HOW WE SPEND IT! "