Your Dec. 17 editorial “Law of lending” about payday loans requires correction. Ohio’s Short Term Lending Act was intended to put payday loans out of business. Legislators were told that a maximum 28 percent annual percentage rate represented a 90 percent revenue cut, which no business can survive.
The Blade mistakenly believes that passage of the initiative that upheld the law represented the people’s will. Yet only 4 percent of people use payday loans. Outside of this demographic, most have never heard of the product.
People had no idea what they were voting for. It sounded like a good idea to cap rates, without understanding the 90 percent revenue cut it represented.
In the recent Ohio 9th District Court of Appeals case, Judge Clair Dickinson correctly ruled that the state should rely on the Second Mortgage Act’s plain language, rather than on a creative interpretation, as the majority did.
The Blade correctly notes that payday loans “provide a useful service to people who need short-term emergency cash.” Millions of Ohioans use payday loans, choosing them over other options time and again.
You express proper concern that when borrowers can’t pay back a loan right away, a small debt can become a big financial hole. Yet this rarely occurs; it’s a long-playing myth perpetuated by payday loan opponents.
The hysteria over payday loans is overblown. For 22 years, 12 million Americans have used the product, and continue to use it. If it were as harmful as claimed, the customer pool would have dried up long ago, as people do not repeat costly mistakes.
President PDL Capital Inc. Los Angeles
Editor’s note: PDL Capital specializes in financial consulting and brokering services.
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