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Voters May Decide Fate of Payday Loans

Thursday, June 19, 2008

Until now, the industry has largely confined its efforts to battling state legislatures, many of which have moved to protect borrowers who take out the short-term, high-interest loans. Ohio, New Hampshire and Virginia lawmakers approved payday reforms this year.

Now industry officials are trying a new tack. In Ohio, they are seeking a referendum on the Nov. 4 ballot that would in effect reverse the Legislature's action. In Arizona, an industry-led coalition is collecting signatures to qualify for a ballot initiative wiping out a state law that will shut down the industry in two years.

The strategy could be risky. If voters reject the ballot measures, opponents of payday lending say they would use the defeats to puncture the industry's argument that such loans are popular with consumers who need small amounts of cash for emergencies. The borrower usually receives the cash after writing a personal check for the loan amount and a fee. The lender holds the check until the worker's next payday, usually two to four weeks, when the borrower must pay off the debt.

But Steven Schlein, an industry spokesman, said polls show consumers don't like it when legislators take away choices. "Once the message gets out that a financial option was taken away, Ohioans will not like it," he said of the ballot proposal.

Ohio was the big prize for the national coalition of consumer, religious and senior citizen groups that has been fighting the industry. They contend that payday loans snare borrowers in a cycle of debt because they keep taking out loans they can't repay. The average loan is about $300; lenders usually charge $15 for each $100 borrowed until the next paycheck, or nearly 400 percent annual interest.

Source : http://www.infozine.com