Badin vs. Fredericktown
Miamisburg graduation 2012
Valley View vs. Greenville
Ellen Belcher is the Dayton Daily News opinion pages editor. She writes about state government, education, the environment, higher education and all things Dayton.
Martin Gottlieb is an editorial writer and columnist for the Dayton Daily News opinion pages. He focuses on the political process itself and does such national issues as war, the economy, taxes and Social Security, as well as a hodge-podge of local and state issues.
Scott Elliott is an editorial writer and columnist for the Dayton Daily News opinion pages. He writes about education, city and suburban issues, politics, business, workforce and consumer issues.Home > Blogs > A Matter of Opinion > Archives > 2010 > May > 28 > Entry
Guest column: Consumers want the option of small-dollar loans
This column was written by Ted Saunders, chief executive of CheckSmart.
Ohio has been hit hard by the economic climate. Many households are making difficult decisions every day to make ends meet.
This reality emphasizes the need — and value — of reliable access to short-term credit.
Unfortunately, short-term loans — usually around $300 — are too frequently undervalued by some legislators (and other critics of retail consumer lending). They seek to take financial choices away from those who need them most.
This misunderstanding was clear when the House passed HB 486 — legislation that will effectively eliminate access to relatively small-dollar loans. This bill was rushed through the House in a highly politicized manner.
Since then, there has been a genuine sharing of ideas on regulating short-term loans. But HB 486 does not reflect this.
Economists, small-business owners and clergy members delivered compelling testimony in opposition to the bill because they understand it will cause Ohioans to lose valuable access to credit while also eliminating jobs.
Additionally, this bill creates an uneven playing field, giving depository institutions a competitive advantage. These institutions will not be subject to the provisions of HB 486, including a limit on the number of loans offered per year, even though they provide a similar service.
Clearly, this bill is intended to shut down certain lenders in favor of others.
Consumers choose regulated short-term loans because other financial institutions do not fully serve them, and other options are often more expensive. HB 486 removes the ability to make that choice, but does nothing to reduce the need for reliable and affordable credit.
Some argue that consumers could use loan services offered by banks and credit unions. But these purported alternatives often involve a variety of restrictions and complicated fee structures. They are not an adequate substitute for the small-dollar, short-term loans offered by retail lenders.
Furthermore, these alternatives are not widely available. Research from Victor O. Stango of the University of California, Davis found that fewer than 6 percent of credit unions nationwide offer comparable short-term loans, primarily because “they see little chance to break even” on a low-cost, high-risk service.
Our critics also dismiss the sophistication of our customers. Indeed, the Daily News recently described them as “unsophisticated” and “desperate.” These assertions are unsubstantiated.
Our customers are salespeople, bus drivers, emergency personnel and even journalists. They make difficult decisions every day on the job and for their families, and are entirely capable of making informed economic choices.
This is confirmed by a study from the George Washington University School of Business. Roughly half of the consumers surveyed considered other forms of credit — such as bank or credit union loans — before selecting short-term, small-dollar loans.
The Daily News has also cited a so-called “will of the people” rationale for shutting down lenders, which overlooks tens of thousands of Ohioans who continue to utilize short-term loans.
Ohioans voted to sustain a severely restrictive fee cap on payday loans in 2008, and, as a result, many neighborhood lenders across Ohio have closed. To be sure, Ohio voters made their voices heard on the issue of payday loans specifically, but not on the need for short-term credit in general.
Some lenders, including CheckSmart, have altered their services in order to continue providing small-dollar loans. Indeed, state lawmakers urged lenders to make these changes and encouraged us to offer loans under the Mortgage Loan Act and Small Loan Act. The consumer loans that we now offer are different loan products than payday advances.
Our company provides a vital financial service; it is cost-competitive, simple and proportional to the needs of many consumers. In these uncertain times, it is imperative for legislators to consider the harmful impact that eliminating these loans would have on real people.
Permalink | Comments (8) | Post your comment |
Tweet
Comments
By Max
May 28, 2010 5:36 PM | Link to this
While interest rates could be considerably lower for these loans, removing any choice from the marketplace under the guise of ‘consumer protection’ is not the business of a government which pays its bills by way of loans from China.
By Max
May 28, 2010 5:38 PM | Link to this
While interest rates could be considerably lower for these loans, removing any choice from the marketplace under the guise of ‘consumer protection’ is not the business of a government which pays its bills by way of loans from China.
By Mike R
May 28, 2010 6:06 PM | Link to this
I can see both sides of the argument. On one hand, there’s the DDN editorial staff opining for the “little person” being “screwed” by these sharks. However, Martin or Ellen wouldn’t know or know what to do if they ever met one of the “little people” they so valiantly fight for. I doubt very seriously Ellen or Marty go to the East or West side of Dayton or Springfield, or Hamilton or Middletown where places like CheckSmart setup shop. If one just looks at the interest being charged it’s just an astonishing number. However, as this guy wrote, it’s high risk. Many of these loans are written off as uncollectible and if you look at the total return on investment these companies make it’s not unreasonable. In fact, companies like Google and Apple make higher profit margins. There is a market for these firms, which is disheartening, but that’s another story. I for one know first hand, hiring individuals from the cities I mentioned above, that employees and potential employees don’t have bank accounts and they depend on firms like Mr. Saunders’.
By Ice Bandit
May 31, 2010 9:37 AM | Link to this
Suppose you’re young, don’t have a credit score, and your car’s water pump commits suicide, and ya’ gotta’ get to work. No bank will float a $200 loan and your friends are tap-city. You go to the payday loan place. Adults entering into mutually beneficial agreements should not undergo legal scrutiny just because older, suburban folks think the interest is too high…
By Max
May 31, 2010 11:08 AM | Link to this
What Mr. Saundeers, or the DDN, fails to address is the force behind these regulatory proposals is not the ‘people’ but the banking industry. Banks won’t loan to low credit score people, or 30-day notes, so, they don’t want anyone else to do so either. With a potential high profit potential for banks, even with lower interest rates than payday loan companies, the banks could enter the market as well. But, they don’t. It’s about freezing out competition, not a moral issue as the banks pressured the legislature to assume.
By Stella Clark
June 22, 2010 7:41 AM | Link to this
Hello Customers, I am Mrs. Stella Clark a private loan lender, i offer loans to individuals firm and co-operate bodies at 1.8% interest rate loan term and determinant. Loan for developing business a competitive edge. The loan amount you want ranges the rate from 1,000.00 POUNDS up to 800,000,000.00 POUNDS I offer the the following kinds of loan *Personal loan *Business loan *Undergraduate loan *Graduate loan *MBA Education loan *Medical loan *Combination loan Also i will like to know if you are serious minded about getting this loan from my company, because we only deal with serious minded and God fearing person who have good means of paying back the loan. Below are some of the details required for getting this loan. Applicant’ Name: Address: City: State: Country: Age: Marital Status: Sex: Occupation: Phone and Cell Number: Amount Needed: Monthly Income: Account Balance: Purpose of Loan: Scanned Copy Of Identity: Do contact me on my private email address: loangivingagentausec@yahoo.com Best Regards, Mrs.Stella Clark Telephone: +442070439799 CEO/Managing Director Stella Loan Firm
By Stella Clark
June 22, 2010 7:45 AM | Link to this
Hello Customers, I am Mrs. Stella Clark a private loan lender, i offer loans to individuals firm and co-operate bodies at 1.8% interest rate loan term and determinant. Loan for developing business a competitive edge. The loan amount you want ranges the rate from 1,000.00 POUNDS up to 800,000,000.00 POUNDS I offer the the following kinds of loan *Personal loan *Business loan *Undergraduate loan *Graduate loan *MBA Education loan *Medical loan *Combination loan Also i will like to know if you are serious minded about getting this loan from my company, because we only deal with serious minded and God fearing person who have good means of paying back the loan. Below are some of the details required for getting this loan. Applicant’ Name: Address: City: State: Country: Age: Marital Status: Sex: Occupation: Phone and Cell Number: Amount Needed: Monthly Income: Account Balance: Purpose of Loan: Scanned Copy Of Identity: Do contact me on my private email address: loangivingagentausec@yahoo.com Best Regards, Mrs.Stella Clark Telephone: +442070439799 CEO/Managing Director Stella Loan Firm
By Pastor Brunels
December 17, 2010 3:34 PM | Link to this
Are you financially squeezed? * Do you seek funds to pay off credits and debts * Do you seek finance to start up your own business? * Do you seek loans to carry out large projects * Do you seek funding for various other processes? We Currently Offering Private, Commercial and Personal fund with very Minimal annual Interest Rates s Low as 3% . contact us at brunels@live.com WE OFFER fund from $5,000.00 minimum to $900,000,000.00 ABOVE FIRST necessary information. Full name: Nationality: Country: State: Home Address: Zip / Code: Age: DD / MM / YY: Marital status Current status in the workplace: Telephone / mobile number: Quantity required: Duration: Which Site Did You get My ads: 2% interest per month,minimum of $ 5,000.00 to $ 900,000,000.00 contact brunels@live.com E-mail:brunels@live.com Thanks you. Yours sincerely in service Pastor Brunels