A Poor Business Model

Well, it's now official: Ohio Governor Ted Strickland signed into law a 28% cap on what payday lendings can charge for their unsecured, short-term loans. When lenders have been previously counting on returns of closer to 400%, this law will effectively shut down the payday loan industry in Ohio.

Here's an article from CNN about the growing threats to payday lending business model across the country. The Democratic presumptive nominee Barack Obama has already proposed a national cap of 36%, and it seems pretty clear that there is downward "pressure" on the stock prices of Advance America Cash Advance Centers Inc. and QC Holdings Inc. Perhaps these firms can remake their business models to find innovative ways to offer consumers valuebale services that don't depend on capturing them into a debt trap.