Innovation is alive and well in the payday loan industry:
On Nov. 4, 2008, “Ohio voters stripped payday lenders of their permit to fleece working people,” said Bill Faith, one of the leaders of a successful referendum to limit interest rates on short-term loans.
But after that overwhelming defeat, the short-term lending industry dusted itself off and got creative.
Payday lenders are making as much, if not more, on their loans as they did in 2008. And after a two-year, behind-the-scenes battle, state banking regulators admit they can’t do anything about it. Only the legislature can, they say, and lawmakers have no plans to take up the issue.
Instead of paying out loans in cash, payday lenders cut checks to their clients. They then offer to cash those checks for a fee somewhere between 6 to 10 percent of the value of a check, or $30 to $50 on a $500 loan, according to loan documents and officials familiar with the practice.
Payday executives argue that the state has relented because their actions are within the law. Those rules are unlikely to change, they say, because customers demand their product. [Emph. added]
Good! Payday lenders may be a lightning rod for the goody-goody consumer types, but they provide a valuable service for cash-strapped consumers. If the utility bill is due, it’s due. The alternative to taking out a payday loan to cover would be writing an NSF check. That can be more costly than a payday loan would be. Oh, and it’s against the law. . . .