Wednesday, January 26, 2000
Legislator: Payday loans need rules
Self-regulation not enough, Mallory says
BY MARIE McCAIN
The Cincinnati Enquirer
Continuing to take a microscope to the practices of the payday lending industry, state Sen. Mark Mallory said Tuesday he was pleased by a set of industry standards introduced to ensure consumers get the best service from these businesses.
However, he said, theguidelines don't do enough.
The Cincinnati Democrat said he still thinks outside regulation might give users of this fast-growing, high-interest money-lending service greater protection.
Mr. Mallory said he is considering creating of an oversight group composed of credit counselors, industry experts and others that would regulate industry practices and hold agencies accountable via more tangible punishments.
In November, the senator, along with state Reps. Samuel Britton and Catherine Barrett, convened public hearings to determine whether this industry does more harm than good.
On Monday, the industry's only trade association, the Washington, D.C.-based Community Financial Services Association of America (CFSA), released 10 self-regulating standards called best practices.
Payday lenders who belong to this association are required to either limit or prohibit loan rollovers, fully disclose the terms of a contract including any attached service fees in dollar and percentage amounts and to cease legal prosecution threats to customers who default on loans.
In addition, CFSA members will offer clients 24 hours to rescind a payday loan and encourage consumer responsibility by educating customers about the proper use of such short-term loans.
James Zaniello, CFSA executive director, said Tuesday that these standards culminate a year of research and are a sign that the industry is starting to formally mature.
But to Nicholas DiNardo, an attorney with the Legal Aid Society of Cincinnati, these standards are nothing more than the industry's Band-Aid attempts to stave off outside regulation.
These standards are pure (public relations), he said.
The key to protecting consumers, he said, is to regulate the amount of interest these agencies charge for their quick-cash loans.
A $15 fee per $100 payday loan over 14 days amounts to a 391 percent annual rate.
The highest credit card charges are 24 percent interest, Mr. DiNardo said. The industry needs to limit the interest rate, he said.
Mr. DiNardo said he is involved in at least three cases where consumers were sucked into further debt by using these agencies.
Self-policing in this industry is fairly worthless, he said. There needs to be either a state or federal agency that receives yearly reports and does audits of these services.
Both Mr. DiNardo and Mr. Mallory also agree that the payday lenders need a national database that will let them know when someone has an existing loan. Such a database would let them know if a customer has a serious financial problem.
Voters tired of the trivial
3 engineers face firing in street deception
UC to add life to campus
Ex-Red indicted in deadbeat-dad case
Japan mission aims for trade
Legislator: Payday loans need rules
Bitter cold should end by weekend
Blackwell N.H. point man for Forbes
City wants buyouts back
Delhi man charged in threats on Furman
Fired Rumpke driver gets $500,000
Roeding gets surprise challenge
Compact could have killed mine
N.Ky. gets its share of budget
NKU considers faculty review
Northern Ky. primary picture
Queen City's moments to shine reflected in book
The 'acting' White House
GET TO IT
Getting married? Be in our 'Love Story'
Music takes center stage at Sundance
Ask away on school split
Funds to allow buyout of flooded homes
Health board OKs license for landfill
Land rezoned for new megamall
Man held on $500K bond in shooting
More options for prepaid tuition
New board to review property code rules
School treasurer leaves for Mason
Scoring error fixed; man to be on court clerk ballot
Series of ATV thefts targeted
Students sentenced in plotting massacre
Teacher testifies she was shot at