Pay Day Lenders, Unemployment

The pay day lenders have turned in their petition, and now they wait for the reply. They are trying to get the heavy restrictions recently placed on them by the Ohio Legislature put onto the ballot. The theory is enough of their customers will be so outraged at the new limitations the bill will be overturned.

A good theory, and democracy in action. But is it a wise move?

That's where the unemployment comes in. Ohio has more people unemployed than at any other point in the last 16 years. A lot of these people, I'm willing to bet, are either taking out cash advance loans or already have. My question is, how are they going to be able to pay these back while their jobs keep vanishing?

The main issue behind wanting to regulate the industry is the fees. If you do the math, the annual interest rates are absurdly high. The Federal Trade Commission gives this example, with a number of 391%. (And I thought Mastercard was bad...). The Ohio Legislature figures that's more or less loansharking, and needs to be stopped by capping the rate at 28%.

But...I've known people who did these. And they aren't going to make their car payments, or pay for medication, or buy milk for the kids any other way. It's an evil, but maybe it's the lesser of two evils? Or is the problem the fact people don't get just one loan; they get a series of loans, in order to pay off their first one (or to cover bills left unpaid because they made good on the first loan).

Maybe if the loans aren't as readily available (because most of the payday lenders have shut down, as the industry claims will happen) we'll be forced to address the fact that millions upon millions of Americans aren't able to pay their bills each month.