Credit Counselors Critical of Payday Lending
A new Policy Matters Ohio report details survey results from credit counselors who were asked questions about payday lending. Policy Matters surveyed 17 counselors from 28 Ohio counties and results were consistent.
"Counselors were particularly alarmed at the high interest rates of loans and the number of clients who had several outstanding loans at once. On average, counselors said that their clients had outstanding payday loan debts of $1,000, and that their clients, on average owed debts on four different loans at any given time. Counselors also mentioned payday loan debt interfering with paying other household expenses such as housing and transportation costs."
The counselors surveyed were concerned about the harm that payday loans were inflicting upon their clients and made recommendations to their clients struggling with a short-term financial crisis: 1) develop an emergency savings plan, 2) use the "stretch pay" program offered by Ohio Credit Union league members, and 3) don't pay off one payday loan with another payday loan.
The report concludes by recommending the passage of Issue 5 on the November ballot, which would keep Ohio's payday lending reform law in place. The reforms cap interest rates on payday loans at 28% APR, down from 391% APR and limit the number of loans a borrower can take out at 4. The reforms are aimed at curtailing the endless cycle of payday lending debt that over 300,000 Ohioans find themselves in.
You can read the entire Policy Matters Ohio report here: http://www.policymattersohio.org/WiseCounsel2008.htm
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