Dear Rep. Lundy:
I understand you are introducing a bill in the Ohio legislature limiting all forms of lending to an annualized interest rate of 28% with no other fees of any kind permitted. As everyone knows, due to the average default rate of 6% and average monthly store overhead of $8000, it is impossible for a payday lender to stay in business without receiving about $15 in revenue for every $100 borrowed. This is a fact. A simple one. I can show you the profit and loss statements of many payday lenders to prove it beyond the shadow of a doubt. As a former investigative journalist, you’d want those facts, right?
Your goal, apparently, is to put payday lenders out of business. â€œWe want to make sure all the doors are closed and all the windows are locked shut, and it’s taken a lot of time,” you said.
My question to you, sir, is why do you want to do this?
On your website, your campaign promise was that you would create new jobs.
You do realize, sir, that by putting lenders out of business, you will kill 6,000 jobs?
Iâ€™m not asking rhetorically, sir, Iâ€™m putting that question to you directly. Do you have an answer? What will you do for these people after you toss them onto the street in the midst of a terrible recession? Do you NOT believe this law will kill 6,000 jobs? If so, why?
Furthermore, Rep. Lundy, you do realize that last yearâ€™s legislation was foolish, donâ€™t you? And pease donâ€™t trot out the ballot initiative that upheld the legislatureâ€™s law. Only 2% of the population uses payday loans. Nobody knew what they were voting on.
You do realize that this rate cap removes a credit choice from the people who elected you, sir, to office? Do you realize that payday loans are the least expensive option for people in need of short-term credit?
Donâ€™t listen to me. Listen to the FDIC. Their November study demonstrated that the average size for a bounced check was $60. The average fee for this bounced check was $66 to the consumer.
You can get a $60 payday loan for $9.
$9 payday loan, or $66 for a bounced check?
This is not a rhetorical question, sir.
Americans are not stupid. They know a bargain when they see it. Thatâ€™s why 25,000 payday loan storefronts exist. Thatâ€™s why millions of American use it as an option. Thatâ€™s why opponents never, ever bring up the fact that the number of complaints about payday lenders are miniscule.
They also never, ever bring up the fact that 94% of loans are paid back on time.
Donâ€™t believe me? Open up the annual reports of any public payday lender.
The FDIC said a lot more. In 2007, payday lenders provided 154 million loan transactions and collected $6.8 billion in fees.
But that same year, bank and credit union accounts were overdrawn by consumers 1.22 BILLION times, generating $35 BILLION in fees.
Rep Lundy, it is all there in black and white. This isnâ€™t spin. This isnâ€™t politics. Itâ€™s
The Ohio legislature, against all common sense, tried to put payday lenders out of business with a Draconian law based purely on politics. They utterly ignored the 30,000 letters sent to Capitol begging for them not to pass this law. They ignored the facts and played politics. They utterly ignored the parade of experts â€“people smarter than you or I â€“who unequivocally proved why payday loans are needed and why consumers are much worse off without them.
Donâ€™t believe them? Donâ€™t believe me? Go read the Morgan report for the NY Fed. Go read the Dartmouth study. Consumers fare worse when payday loans are run out of town.
The payday lenders didnâ€™t utilize any â€œloopholeâ€. They legally, and with full disclosure, choose to operate under a different law. If they wish to provide the loan in the form of a check, it is their right to do so. The consumer is not forced to cash a check in the store. Nor were they forced to take out a loan in the first place.
Again, sir, I want to make this clear: It is the consumers choice to take out a loan. It is their choice whether or not they wish to cash the check in the store.
Choice. Freedom. That’s America.
These are all facts, Rep. Lundy. No spin. Itâ€™s the straight-up truth.
So Iâ€™m just puzzled, sir, why you want to take away the choice of free Americans to do as they wish? Why not let people who need a loan get a loan? If they donâ€™t like the price theyâ€™re paying, they wonâ€™t take it out. Why take away 6,000 jobs in a recession? Why force people who need credit to pay MORE than what they pay now? Why insist on stopping a lender from doing business legally, the way he wants to do business, and to which consumers have no quarrel?
The only reasons I can think of, sir, is that you either havenâ€™t been educated fully on payday loans (which I hope I have now accomplished), or you are just choosing to ignore all these facts for the purposes of political grandstanding.
As a former investigative journalist, sir, you know that getting the facts right is the most important part of the job.
You have the facts. Donâ€™t be a politician. Do the right thing and leave the payday lenders, and the Free Americans they serve, alone. If they need you, theyâ€™ll call.
Because if you push this bill forward, youâ€™ll be showing an awful lot of people that you donâ€™t care about the facts, you donâ€™t care about them, and worse â€“ that reality has no meaning to you.
Why would you do that?
If you would care to discuss this issue, I’d be delighted. Just contact me at email@example.com