Generally speaking one expects our politicians regardless of political color to do their very best for all sectors of the population. Not so in Ohio. Yesterday the Republican heavy Ohio Senate voted to change the Payday Loan industry. And change it in such a fashion that the vast majority of the 1600 or so Payday Loan businesses in the state will be forced to close their doors resulting in 6,000 people losing their jobs.

This new law, that governor Ted Strickland is expected to ‘rubber stamp’ later this month limits the APR of short term loans to 28%. This makes it uneconomical for the Payday Loan purveyors. You cannot survive making a loan of $100 and only getting a few cents for your trouble. A great explanation of the economics of the industry was given to me by Lawrence Meyers.

The loss of 6,000 jobs is only the tip of the iceberg though. By killing the industry the Republicans have now started a domino effect that will have disastrous results on the working poor. Thousands upon thousands of Ohioans live pay check to pay check with no financial cushion for unexpected problems, the Payday Loan offered a life raft for those emergency situations. Where will they go now? They have no credit cards, they have no leverage with their bank, they are, as we would say ‘screwed’!

One of the arguments put forward is that the Payday Loan industry creates an environment that creates chronic borrowing. A situation where you have to borrow because you have to cover the loan you just paid off. Playing devils advocate for a moment, lets assume that 25% of borrowers fall into that category. I have no idea how many people that would equate to in Ohio, but I would guess it would be in the thousands.

When Ted puts his monika on this ridiculous bill what happens to these people? Suddenly they can’t pay the rent, can’t afford to take their child to the doctor, can’t afford their medication, can’t afford to buy groceries, etc, etc.

I will tell you what will happen, they will lose there homes and apartments, and they will join the increasing number of homeless. Once they are homeless they will lose their job. When they have lost their job they will become a huge burden on the state.

Oh, and do not think for one moment that I am exaggerating, for the past 6 years I have worked in a very large homeless shelter, one that provides accommodations for 1,100 people nightly. I understand this economic cycle all too well, and it is vicious and inescapable. I just hope that Ted Strickland has budgeted for the economic strife he is about to unleash on Ohio.

Ohio is predominantly Republican, but McCain had better watch out, I suspect that few of the working poor will be putting a check mark next to his name if this legislation goes through.

In my opinion this law is the apex of political stupidity.

Simon Barrett

http://zzsimonb.blogspot.com

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