Voters kick payday lenders to the curb in Ohio, Arizona…

November 6, 2008

There’s obviously many election stories still coming out from Tuesday’s results, but one that I’ve been following has been ballot measures in Arizona and Ohio designed to limit how much interest payday lenders can charge. In Ohio, voters approved Issue 5, which caps interest rates on payday loans at 28% by a 2/3 majority, despite a glitzy website and lots of ads that warned of all sorts of problems if the measure was approved.

Yesterday, Cash America (CSH), a large payday lender in the state put out this press release bemoaning the results and noting that it would now be forced to close 43 branches in the state “leaving about 150 of our hard-working coworkers without jobs. The 43 branches represent about 1/3 of Cash America’s operations in the state. In the release, CEO Daniel Feehan noted that, “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, as well as to prevent negative economic impacts in the state through the loss of jobs and the closing of many places of business.

Cash America wasn’t the only payday lender to issue a woeful-sounding presser. This morning, Advance America (AEA) issued this release saying that it planned to keep operating its 244 branches in Ohio under a state-issued “small loan license.” But there was a caveat in the release: “If, however, Advance America determines that it is unable to implement an economically viable alternative loan product in Ohio, it may close some or all of its centers in Ohio.”

Other payday lenders in the state have yet to weigh in. About 15 states essentially prohibit payday lending by setting caps on how much interest the companies can charge. As I first wrote in Slate several years ago, interest rates can easily top 1000% by rolling over loans time after time.

In Arizona, Proposition 200 which would have extended the ability of payday lenders to operate in the state beyond July 2010, was defeated with about 60% of voters voting no.

The Center for Responsible Lending, which spends a lot of time focusing on payday loans, issued its own release yesterday hailing the votes, noting that, “You can get no clearer message than a huge majority of voters rejecting 400 percent interest loans. A reasonable two-digit cap is sensible, fair, and it works to keep bad apples out of the consumer lending arena.”

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