Payday lenders lose big in election - Top Stocks Blog - MSN Money
 
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Payday lenders lose big in election

Posted Nov 06 2008, 04:52 PM by Kim Peterson
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One of the overlooked losers in Tuesday's election is Cash America, a payday lender and pawn shop operator with locations in Ohio and other states.

See, voters in Ohio don't like being fleeced, and fleeced in this case meant a 391% interest rate cap on payday loans in the state. So they approved an issue chopping that rate to 28%.

Payday lenders naturally opposed the move, saying it would put their stores out of business by making it unprofitable to offer loans. They argued that without payday loans, the government might have to step up its own assistance programs for people with unplanned expenses (read: tax increase).

But the lenders lost, and the day after the election, Cash America said it would close 43 loan shops in Ohio.

"There is no way to sustain a viable store front business by offering small, short-term unsecured consumer credit at this rate," Cash America CEO Daniel Feehan said in a statement. About 150 jobs would be lost from the store closures.

Another payday lender, Advance America, said it will start offering small loans in Ohio at the new interest rates, but it may close its locations if it can't find an "economically viable" solution.

A similar story played out in Arizona, where voters rejected a proposition that would allow payday lenders to go on with business as usual indefinitely. Right now, the industry will be limited to 36% interest rates by 2010.

Other states are coming down hard on payday lenders, and the issues in Ohio and Arizona warn of further troubles for the industry. Investors are not optimistic these days. Cash America shares have fallen from above $44 in August to the $30 mark today, and Advance America is close to penny-stock status.

Image credit: Gregory Maxwell via GNU free documentation license

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Comments

 

They should have read Shakespeare's "Merchant of Venice" - It's appropriate that stories of usury don't have a happy ending!

Miles (Posted 11.06.08 9:04 PM) Report Abuse

Payday loan companies are slimy opportunists.  However, the term "unplanned" expenses, as the term should be used,  is true only for some of their customers. Mostly its for people who are financially irresponsible.  The world would be better with both of them gone

mb (Posted 11.06.08 10:24 PM) Report Abuse

Theft from stupid people is still theft.  Nice that someone noticed and put a stop to it.  Maybe other states should take notice and do the same!

Shannon (Posted 11.06.08 11:33 PM) Report Abuse

I lived in NM for  a few years and there was a payday loan and car title shop on every corner, I guess they were doing a brisk business, but it does take advantage of people in poor conditions, but perhaps it serves a purpose when people have no place else to turn?

Chris K (Posted 11.07.08 1:02 AM) Report Abuse

Payday lenders along with the sub-prime mortgage lenders should be treated like the financial terrorists they are.  They should be hunted down, their assets siezed, and sent to jail for a very, very long time.  

This kind of predatory lending is at the heart of our current global financial crisis.

Sgt Mom (Posted 11.07.08 5:36 AM) Report Abuse

if banks would actually help, these places would cease and desist

john (Posted 11.07.08 7:52 AM) Report Abuse

If 25% and 36% interest rates aren't enough, then the business needs to be shut down.  I realize the loans are unsecured, but at those rates even if one out of three or four loans totally default, there is no net loss.  I realize there are overhead expenses too, so add that in and you would have to have an unbelieveably high rate of defaults before you lose money at the interest rates.

And the 391% that had been charged - the mob doesn't even ask for that much.

Roland (Posted 11.07.08 7:55 AM) Report Abuse

I live in the home state for Advance America, South Carolina, and the legislature has steadfastly refused to look out for its contituencies and severely regulate this abominable industry.  Payday lenders should suffer the same fate that video poker did years ago.        

sid (Posted 11.07.08 8:34 AM) Report Abuse

Although I have never used such a service, I must assume that they were and still are( by federal law) allowed to exist and charge these exorbitant interest rates, no telling how much our political leaders rake into their billfolds that state legislatures and congress have never acted to stop such practices. The way that I see it, it is loansharking. I think that their maximum interest rate should be cut to no more than 10% simple interest annually. However, in order to help them to stay in business, I guess  that we could allow them to charge a 1 time loan fee of five dollars, provided that the loan is granted. That would give them a return of 15% if a loan of $100 is repaid in 1 year.Good enough for them!

Don Stockstill Ozark, Missouri (Posted 11.07.08 8:40 AM) Report Abuse

The banks are doing the same thing !  ATM fees on 20.00 to eat lunch is close to 30 %  and when you NSF a 11.00 check they charge you a 350 % fee on that.  We need to reform all lending practices...

Down with the man !

Also when Obamanation happens thay will steal your 401 k IRA and then raise everyones taxes to carter rates.  

God save us !

Fred Bob the Citizen (Posted 11.07.08 8:59 AM) Report Abuse

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