Ohio payday lenders look for options

Friday, Nov 14, 2008

The payday loan industry -- stung at the Ohio ballot box with a strict new law -- is looking for other ways to do business, prompting consumer advocates to worry that lenders are finding a way around the election results.

Lenders are focusing more on services like pawn brokering and gold buying, and some are applying for licenses under other Ohio loan laws. Consumer advocates plan to take a close look at what lenders are doing.

Payday loans work this way: A borrower goes to a check-cashing company and writes a check. The company gives the person cash, minus a fee, and agrees not to cash the check until his or her payday.

Voters on Nov. 4 approved a new law that cuts the annual percentage rate that payday lenders can charge from an average 391 percent annual rate to 28 percent, and limits the number of loans customers can take to four per year. It is among the strictest laws in the country.

Delaware's Legislature moved to restrict payday loans several years ago, forbidding lenders from "rolling over" unpaid balances of loans more than four times, and demanding that debtors have the right to pay off the loan without charge by the end of the next business day.

Lenders also are not permitted to "pursue or threaten to pursue criminal action" for a paid loan, must provide applications in both Spanish and English, and spell out the potential of additional fees if the loan is "rolled over."

Source:: Delawareonline.com