HB545’s Hollow Victory
Somewhere along the path of Ohio legislative sausage-making, House Bill 333 was transformed into House Bill 545. HB545 (ne. HB333) was the legislation I wrote extensively about that limited the interest rates that could be charged by Payday Lenders in the State of Ohio. The bill was signed into Law on June 2, 2008 by Governor Strickland.
When the law takes effect in 90 days, it will put an end to the payday lending industry as it exists in Ohio, likely pushing many of Ohio’s 1,600 payday stores out of business. No longer will lenders be able to offer two-week loans with a 391 percent annualized interest rate ($15 per $100 on a two-week loan).
My pastor regarded the Bill’s passage as a great victory in providing social justice for the poor. I cannot concur with that simplistic opinion. I have written my opposition to the Bill (whatever its number) in this blog on numerous occasions. My objections were scriptural, moral, and practical. If events work out as indicated in the Columbus Dispatch, then my predictions will prove to be frighteningly accurate.
In the process of protecting the poor from the “pirate ships” of the Payday Lenders, the governor in association with the State’s pastors, have thrown them overboard into shark infested waters. Probably Loan shark-infested waters.
The Payday Lenders are, as I predicted, closing up shop. Few made much profit even at the 391% rates. None could stay open at the newly mandated limits of 28%.
National Check Cashers and Always Payday companies said they expect to close their stores in August. Check into Cash, Cash America International and Advance America also have said they expect to close, each arguing it cannot continue to operate under the 28 percent interest rate imposed by the new law.
Asked to comment, Lisa Ferguson, director of communications for Dublin-based Checksmart, declined because yesterday was her last day of work. She said she and her staff had been let go as a result of the bill.
Checksmart’s top executives, company founder and CEO James Frauenberg and his son, Jamie Frauenberg, who also served as president of the Ohio Association of Financial Service Centers, were let go shortly after the Senate passed the bill last month, she said.
In short, the Payday Lenders are not lowering their rates. Instead, they are shutting down and leaving. It is unlikely that regular banks are going to take their place. Most now are not even lending on collateralized home equity loans or student loans due to the latest financial crisis. What are the odds that these same banks are going to do any lending to the poor? I would say a lot less than 28% to one.
In other words, not only is this bad legislation; it is bad legislation that has passed at the worst possible time. It will, and has already, driven out legitimate sources of cash in the poorer neighborhoods.
So that leaves the poor either without credit or funds at any price; or at the mercy of the more violent loan sharks using sources of cash from such nefarious activities as drugs and prostitution. Indeed, the flow of funds will probably move in the direction of those activities. In short, most of the poor will not get any less poor due to this legislation. Some may be brutalized or even murdered as a result. The neighborhoods will grow worse and not better.
Not that my pastor or any of the other pastors desired this result, but such is the “Law of Unintended Consequences.” The Law of Unintended Consequences states that any purposeful action will produce some unintended consequences.
This maxim is not a scientific law; it is more in line with Murphy’s Law as a warning against the belief that we can control the world around us. In other words, each cause has more than one effect, which will invariably include at least one side effect. The side effect can potentially be more significant than any of the intended effects.
Two of the major contributing factors to the Law of Unintended Consequences are ignorance (in terms of incomplete analysis) and basic values (in which certain actions appear required even if the consequences will be unfavorable). Both of these issues came into play in terms of at least the pastors’ involvement in HB545/333. They basically were so concerned about the appearance of Payday lenders’ practices oppressing the poor and the emotional charge that accompanies 391% interest rates that they did not go any further. They went for the quick fix.
Such is the practice of, as Paul says, “zeal without knowledge” (Rom 10:2). It often accomplishes more harm than good. At the same time, by going to Caesar on this issue instead of working itself as the government of God, the church will ultimately besmirch the name of Christ in the very eyes of those it sought to help.
As Robin Williams once said in Mork and Mindy; “the road to Earth is paved with good intentions.” So too is the pathway down to the Slough of Despond. It is something we will have to answer for at the Judgment Seat of Christ and probably a lot sooner than that.
The charges on Payday loans can add up, if someone doesn’t pay on time. Other than that, it’s a good option for someone that doesn’t want to get caught up with credit cards debts. They can also help in a tight situation, its quick, and most places are open longer hours than banks.
—Payday loanThank you for this article. Thank you for staying aware and not just blindly accepting everything that you hear in church. Unfortunately, many Christians are blindly embracing this rhetoric without considering the unintended consequences that will result from this legislation. My biggest concern is that by allowing our government to determine what is “in our best interest,” we are establishing a precedent that we will regret later on. This type of legislation seems to me to be a shortcut to socialism, and one of the reasons why we have so many freedoms in our country is because of its capitalist foundation. However “evil” capitalism may be to some people, it is one of the main reasons why we have the freedoms that we enjoy.
I would like to invite you to stay in touch. I’ve recently started a website that I intend to be a unifying front against this type of rhetoric. It’s PaydayFacts.org. I would really appreciate it if you would allow me to post a link to this article.
Once again, thank you!
—Jonas WalkerAll of my posts can be quoted in full or in part, as long as a link exists to the actual post. In other words, feel free to post a link or quote this article. I am flattered.
I too think the eagerness of the churches to support the State in such restrictions will turn around on them someday. Witness the Human Right Commission efforts in Canada used now to suppress free speech and specifically Christian free speech. Same tactic or political philosophy in action.
—CaineThanks - especially for your analysis of the scriptural aspects of usury.
One word that I spot in the discussion catches my attention: “poor”. What exactly is it? The neighborhood around the store where I work has a median household income of over $60,000 per year. Our customers are primarily from the neighborhood and have incomes around this mark.
To get a loan you have to meet requirements for income, residence and have a checking account in reasonably good shape. Based on these underwriting factors the customer will qualify for a $50 to $500 loan - or be declined altogether.
My prediction is that H.B. 545 probably won’t greatly affect the very poor. They will still be poor. But it will push median income families into paying more fees at the credit union, or force them to miss work when they can’t repair a car, or keep their kid out of scouts because they can’t pay for a uniform this month… In other words it will be detrimental to the middle class.
—Glennwhat did the poor people do before there was a preditory lending service?
—billFirst, I do not concede it is “predatory” lending. Second, I do not know exactly what the poor did to obtain emergency funds. I suspect real loan sharks that broke bones for lack of payback were the source. However, what can be certain is that whatever the source was it was no better than the payday lenders. If it was, the poor would have stayed with those sources rather than become users of the “predatory” rates.
Also, per my sources a great many customers of these institutions are not the poor as we would define them. Many are from the middle class.
Also, please see the whole series I have done on this topic. I do not consider the high interest rates “good;” just better than the available alternatives (none).
—CaineThe current presidential candidates, Barack Obama and John McCain, supported an anti-payday loan bill in 2006. The bill, which took effect in October 2007, put a 36 percent cap on the interest rates that payday loan stores charge military personnel. The basis behind the bill was the increasing number of American soldiers that found out that loans had been taken out in their names without their consent. Many of these loans were either given to identity thieves or to their spouses. More often than not, the loan recipients borrowed money, but did not repay the loans. A majority of the loans should never have been approved in the first place because the applicants didn’t meet the qualifications. Military personnel as a whole are generally considered low-income and sometimes, unfortunately, considered to possess very little financial knowledge. The government wanted to prevent identity theft of military members because it would also prevent security breaches. Therefore, the government ruled in favor of the measure. Barack Obama would like to employ the measure nationwide. If the same interest cap is imposed throughout the U.S., the payday loan industry will be wiped out. Take time to think about who you’re voting for because your financial liberties are at risk in this election.
—Payday Loan AdvocatePost Courtesy of Personal Money Store
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Aldous Huxley published his most famous novel Brave New World in 1932. The book is a cautionary tale of a dystopian future version of London, Huxley’s hometown, in the year 2540. The book’s vision is of a country ruled entirely by the government, and all conflict, suffering and ultimately, all free thought is against government’s regulations. In brief, it’s about what the world would look like of no one was able to choose for themselves, voice their opinions, or live how they saw fit, all being hampered by a governments’ iron fist. Huxley was criticized for his work, and still is to this day. Whether or not it was controversial, parallels exist in modern America, although not nearly as pervasive. The American government and state governments are beginning to impose many restrictions through legislation. For instance, certain areas in Los Angeles are off limits to fast food restaurants. Burger stands aren’t the only businesses starting to be zoned out; payday loan lenders are also feeling the pinch. Many state and national legislators are pledging to do away with this vital services if elected. They’re trying to get elected to serve their own self interest. Where do we, as people, draw the line at where the government can’t tell us what to do?
—David JohnstonWhile Ohio Governor Ted Strickland confirmed no sign of fallback on his opposition to the payday loan and cash advance industries, he has found a new friend that he’s fighting on behalf of: the state’s community of gamblers. In effect, as of August 1, 2008, but being contested by the people on the November 4 state ballot, Strickland says this is a valiant effort to raise money for their public schools. Although he has been taking deep criticism from all walks of life, including members of his own parish, Strickland has defended his views on several occasions, claiming that, despite his opposition to the expansion of gaming, this one is best for the common good of our children. Modification of the state constitution to authorize the construction of a $600 million casino near Dayton is part of his proposal. Really think about this idea for just a second. If I’m not mistaken, Governor Strickland is instructing his citizens to take a chance and gamble away whatever’s left in their pockets if they are experiencing an unexpected financial sting. Along with that, it is being toted as a good cause for children’s future. When they are short on funds to purchase their children’s clothes and school supplies, Strickland says it is NOT okay to get temporary funds from a payday cash lender to make ends meet. Strickland designed to highlight their opposition to a November ballot push from payday lenders hoping to repeal a new law capping at 28 percent what they can charge their customers for the short-term, high-interest loans. Strickland said the payday loans that amount to 391 annual percent interest rates are “outrageous and unacceptable” and said the legislation limiting the rates to 28 percent was a “reform” not a “ban.
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Think the Philadelphia Phillies are the only story in Pennsylvania this week? Think again. Both John McCain and Barack Obama are braving the torrential downpour that forced umpires to call the Phillies-Rays World Series baseball game on Monday night. Election Day is the temporary finish line for the weary candidates, but for the winner, that’s merely the first signpost on a great marathon. Morning rallies by McCain/Palin and Obama (where’s Biden?) were attended by thousands, McCain in Hershey and Obama spreading his message to the open-eared at Widener University outside Philadelphia. McCain says he’ll fight on, despite what the polls and pundits predict, Palin defends the attack mentality the GOP has taken against Obama/Biden and Obama maintains that McCain will bring America “more of the same,” straight from the George W. Bush menu. For those of us who have ever used quick loans, that more of the same just might mean that they will still be available, that we will hold on to that much of our financial freedom. Under a Democratic president and dominant Democratic Congress, we may not have that choice.
—Payday Loan AdvocatePost Courtesy of Personal Money Store
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Philadelphia Phillies have won their first World Series in 28 years. The last time they climbed to the top of the mountain (1980), Mike Schmidt, Pete Rose and Steve Carlton showed the American League the meaning of spirited, winning baseball. Today, as emotions run high and the city of Philadelphia gears up for celebration of their boys bringing home the Commissioner’s Trophy, pillars of the community like Temple University are preparing for mass rioting. According to Dean of Students Ainsley Carry, “Students involved in vandalism, refusal to disperse, destruction of property, etc. will face both criminal and University disciplinary action. Sanctions may range from fines up to and including immediate suspension. Surveillance – including videotaping – is heightened during the Series on campus and throughout the city.”
I’m all for personal responsibility, which includes showing respect for others and their property. But is the feel of a police state crackdown necessary? Wait, this is Philadelphia, the “City of Brotherly Love. Of course it is necessary.
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—Payday Loan AdvocateProfessional Blogging Team
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