A small part of the franchise industry is mad at me.
I wrote a short article about an upcoming Ohio vote in November that would keep the interest rate cap for payday loans at a really fair 28%. Our Governor stepped in a few months back, and stopped the crazy practice of these nice franchise companies charging 391% APR on payday loans.
I am no mathematician, but I think 391% IS higher than 28%. Every day.
Here is the article, and some rather colorful comments for your reading pleasure. Please feel free to add some more color.
Anyone need a loan???
If you do this, you won't miss anything!
What I love about Payday loans is that they are meant to be short term and can help in a tight situation if you are running a little short on cash during the month.
Posted by: Payday loan | October 21, 2008 at 05:13 PM
I would not suggest getting into a payday franchise because it makes some large amount of money. To correct what is stated in the original post, a 391% loan only turns a net profitability of 6.6%. Less than most S&P 500 companies. A 28% APR kills any chance of any profitability. Oregon passed a 60% APR cap and the industry has disappeared.
Posted by: Personal Loans | October 21, 2008 at 11:48 PM
"I am no mathematician....."
Well, you certainly did get that portion of the statement correct!!
If you go into a store today & borrow $100, in 2 weeks you will payback $115- so that’s 15%, not 300%! If you pay it back in 12 weeks, it's still $115-- there are no additional fees or charges. FACT
A 2 week payday loan is NOT the same as a 52+ week loan. Simple Fact. Payday loans are intended to be SHORT TERM, not annual loans (besides the fact rollovers are illegal in Ohio and you only can come up with 391% if you loan every 2 weeks for an entire year-- which MOST Customers DO NOT DO) so equating an APR with a PD loan is absurd. We are required by the Truth in Lending Act to disclose "APR", which was conceived before the Payday Industry's popularity.
If I heard an APR of 391% I'd also be irate... BUT I since I work in the Industry and am knowledgable about our products and services, I understand our business model and know its NOT 391%. And I also know our critics like nothing better to harp on 391%. When what they really should be doing is educating themselves and staying out of Ohioans financial choices and decisions.
99% of Americans need to borrow $$ at some point in their lives- student loans, auto loans, mortgage, credit cards, etc. Why should getting a short term loan be anyone else’s business? It’s a CHEAPER option than paying bounced check or late fees. Or certainly better than doing without gas, electricity, water or food until the next paycheck.
This is a business, just like any bank, store, airline, gas station, etc. We provide a service. If you choose not to use it– so be it- your choice. If you decide it’s the best option for you- so be it- your choice. If you decide to repreatedly use payday loans as a means to survive or supplement your income- so be it- your choice. If I decide to go to a drive thru to pick up beer/wine instead of my local grocery store even though I know I will pay a bit more, it’s my right since I find it more convenient and easier.
ITS MY $ & it’s MY CHOICE!
NO on Issue 5!!
Posted by: KCM | October 22, 2008 at 10:25 AM
JL,No ones mad at you.Your opinion is valuable.People are just trying to explain how these numbers that these ADVOCATES are trying to get you to believe are very misleading when it comes to a two week loan.We thank you for the forum and hope some good old debate on the issue will educate people on both sides of the issue.Thanks again for the forum and I hope you will look deeper into this issue because financial freedom is a basic freedom of a free market society and it is under attack in Ohio. VOTE NO ON ISSUE 5
Posted by: dt | October 22, 2008 at 11:47 AM
Thank you for the classy way in which you responded. two sides of every issue is what we all about.
Again, thanx!
Joel Libava
Posted by: The Franchise King | October 22, 2008 at 03:45 PM
Payday loans are a loan choice that millions make. The freedom of choice is one that should never be taken away. When used wisely payday loans can help save money and get you through tight financial spots.
Posted by: payday loan | October 23, 2008 at 12:23 PM
It is so easy to get an online cash loan! It only takes a few minutes and you don't even have to leave the comfort of your home!
Posted by: Angie | October 24, 2008 at 03:03 PM
Although I do commend you on your tasteful delivery, there is absolutely no way that any business that offers only one product could survive by charging pennies for the product/service. 28 Annual Percentage Yield is pennies, literally, on a $100 loan. Unfortunately, that wouldn't even be enough to compensate an employee for their day at the job. As a businessman, of course, you know that there are a number of expenses associated with running a specialized business and 28 annual percentage yield just won't cut it.
Posted by: kralcy | October 29, 2008 at 05:09 PM
28% is fair? How do you define fair? Offering a product so cheap that the only option is to go out of business? You're not thinking about this correctly, so let me help. If a customer took out $300 (the average amount for a payday loan), then a 28% APR would mean approximately a $3.23 fee for that loan. So, while a 28% fee may seem reasonable, payday loans are two-week loans and cannot be offered at the same APRs as annual credit products, and it is not logical to do so.
If you want to do this in reverse and compare annual products rates in two-week terms with payday loans, this is what you would see:
Yes, a $15 fee on a $100 payday loan is 391% APR. However, a $100 bounced check with $55.59 NSF/merchant fee is 1449% APR; $100 credit card balance with $37 late fee is 965% APR; a $100 utility bill with $46.16 late/reconnect fees is 1203% APR; a $100 off-shore Internet payday advance with $25 fee is 651.79% APR; $29 overdraft protection fee on $100 is 755%, just to name a few.
I hope this helps put things in perspective for you.
Reputable payday lenders are not trying to scam people and their fees are very reasonable. The low fee that you are supporting would put every payday lender out of business. A 28% APR, as I just illustrated, could not cover the cost of originating a loan, let alone meeting employee payroll and benefits and other fixed business expenses.
Posted by: Payday Lending Rep | October 30, 2008 at 04:00 PM
It will not be necessary for Dr. Sanjay Gupta to get a payday loan for his financial needs because he has already accomplished a lot in his career, making his financially stable. The door for the new administration is now open for him. It has been reported that President-elect Barack Obama has chosen the respectable, 36 year-old doctor to become the next Surgeon General. There has not been a final decision made, however. Dr. Gupta has served as the chief medical correspondent for CNN for almost a decade. During the Clinton administration, he served as a special adviser to then-first lady Hillary Clinton. He has accomplished many things in his lifetime – from a mountain of education degrees to winning an impressive number of honors and awards for his research accomplishments. This man clearly does not need a payday loan, more so if he takes up the offer to become the nation’s next Surgeon General.
Posted by: Guillermo F | January 15, 2009 at 02:49 AM