Payday lenders use loopholes to survive

Brandi Allen, director of government affairs with Check Into Cash, shows the sign on display in the company's Miamisburg location outlining the interest rates of payday loans. Payday lenders adjusted their businesses after voters in 2008 approved a new state law that tamped down the interest rates allowed to be charged. Some lenders have found ways around the new rules though legislation to close the loopholes is languishing.

Staff photo by Chris Stewart Brandi Allen, director of government affairs with Check Into Cash, shows the sign on display in the company's Miamisburg location outlining the interest rates of payday loans. Payday lenders adjusted their businesses after voters in 2008 approved a new state law that tamped down the interest rates allowed to be charged. Some lenders have found ways around the new rules though legislation to close the loopholes is languishing.

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By Laura A. Bischoff, Staff Writer 5:09 PM Sunday, September 20, 2009

MIAMISBURG — In two hours on a Thursday, only two customers walked into the Check Into Cash store sandwiched between a gyro restaurant and a rug shop in a strip mall.

Store manager Jeff Kesting filled the time by leaving polite messages on customers’ answering machines that they need to pay up.

Payday lenders warned that they’d be driven out of business when voters last year endorsed a state law that caps annual interest rates on short-term loans at 28 percent, down from 391 percent.

Indeed, 736 stores in Ohio shut their doors.

But those remaining — 835 stores — are making money by now offering loans under other sections of Ohio’s law and charging extra fees.

A new study by Cleveland-based Policy Matters Ohio, which is to be released Monday, Sept. 21, found that the short-term loans cost a little bit less now under the new law until extra fees are piled on.

Policy Matters Ohio researcher David Rothstein said he assigned summer interns to call or visit 69 stores and they found that the payday lenders now routinely charge either check cashing fees, origination fees or credit investigation fees.

At Check Into Cash, customers taking out a two week, $300 loan repay $318.62 — $15 for an origination fee and $3.62 in interest. Loans are not dispersed in cash, so Check Into Cash charges 3 percent — $9 on $300 — if borrowers wish to cash the check at the store.

Kesting said no one is forced to cash their checks there — customers sign a form saying they’re doing so voluntarily.

Roughly 25 to 30 percent of the customers go ahead and pay the fee, said Brandi Allen, Check Into Cash government affairs director.

Not everyone gets a loan, Allen said. Typically, customers are in their early 30s, own homes, have children and make $25,000 to $50,000 a year. All of them must have a steady source of income and a checking account.

“We are not going to loan to somebody who isn’t going to pay us back. These are unsecured loans,” Allen said. “That wouldn’t be a very good business practice.”

Contact this reporter at (614) 222-1624 or lbischoff@DaytonDailyNews.com.

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