Payday Loans Industry Reeling after Repeated Blows

[Nov 12, 2008.]

 

Lender Closes Ohio Branches

Last Wednesday saw Cash America announce the closure of one third of its payday loans outlets in Ohio. According to the company, 43 branches, all branded Cashland, will be affected, and about 150 jobs lost.

The move came less than a day after polls in the state closed, and just a few hours after the voters' verdict on payday loan regulation was announced. In supporting Ohio's Issue 5, the electorate chose to cap APRs (annual percentage rates) for payday loans at 28 percent.

The industry suffered a similar set back in Arizona where voters opted for even greater regulation. However, the impact of that decision will not be felt until 2010.

Hard Fought Campaigns in Two States

Daniel R. Feehan, president and chief executive officer of Cash America International, Inc. commented: “As an industry, we did everything we could through efforts like the ‘Vote NO on Issue 5’ campaign to avoid loss of jobs and credit options.”

Unsurprisingly, campaigners for regulation saw the Arizona and Ohio votes differently. Uriah King, a policy associate for the Center for Responsible Lending said: "These two citizens' ballots are really a mandate for cracking down on payday lending throughout the nation. A reasonable two-digit cap is sensible, fair, and it works to keep bad apples out of the consumer lending arena."

Fresno may place moratorium on new payday lenders

In more bad news for the industry, the Fresno Bee reports that Fresno City Council will respond to concerns about payday lending rates by considering imposing a moratorium on new lenders next month. The report claims that the city, which has a population of about 950,000, already has 78 payday lending outlets. If the planned move goes ahead, it will follow similar moratoria in other urban centers in California, including Sacramento, San Francisco and Oakland.

Now banks get in on payday loans act

Meanwhile, the Motley Fool points out that regulated banks, which are exempt from state laws on payday loans, are stepping up with competing products. Wells Fargo, US Bancorp, and Fifth Third Bancorp are all offering their customers payday-style loans with triple-digit APRs.

 

About Author:

Peter Andrew has been writing about -- and for -- business for more than two decades. For the last couple of years, he has found himself increasingly specializing in the U.S. financial sector.