Bill seeks to close payday loopholes

Daniel Middleton, the assistant manager of the Check Into Cash in Miamisburg, assists a customer receiving a payday loan on Sept. 17. Payday lenders adjusted their businesses after voters in 2008 approved a new state law that tapered down the interest rates allowed to be charged.

Staff photo by Chris Stewart Daniel Middleton, the assistant manager of the Check Into Cash in Miamisburg, assists a customer receiving a payday loan on Sept. 17. Payday lenders adjusted their businesses after voters in 2008 approved a new state law that tapered down the interest rates allowed to be charged.

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Payday lenders use loopholes to survive

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By Laura A. Bischoff, Staff Writer Updated 5:21 PM Sunday, September 20, 2009

Lawmakers will hold a hearing this week on a bill that aims to close off loopholes the payday lending industry is using to continue charging high-cost, high-interest loans.

Voters endorsed a new law by a nearly 2 to 1 margin in November 2008 that caps short-term annual interest rates at 28 percent.

Payday lenders lobbied heavily against the ballot issue, saying it would put them out of business. Since that time, about 47 percent of the stores have indeed closed. But many of the 835 remaining stores are using other sections of the state code to make loans and are charging origination fees and check cashing fees that put the cost to consumers well above the 28 percent they may pay in interest.

“Ohio voters spoke during Issue 5 that they want a 28 percent interest cap,” said state Rep. Matt Lundy, D-Elyria.

His bill would require all loans of 90 days or less and $1,000 or less to be interest only — no fees. It would also extend protections in Ohio’s Consumer Sales Practice Act to payday borrowers. He hopes to pass it through the House by the end of the year.

Lundy is particularly upset that many payday lenders no longer pay cash; instead, they give customers checks and then charge them between 3 percent and 9 percent of the loan to cash the check. That adds between $9 and $27 to the cost of a $300 loan.

At the Check Into Cash store in Miamisburg, managers said customers may cash the checks elsewhere and that less cash in the stores was a move to improve security. Store Manager Jeff Kesting said there’s been one robbery at that location in 12 years.

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