Mixed Views On Tightening Ohio Payday Lending

[cashlenders]

When Resha Spencer needed help paying her bills, the Westwood woman visited a payday lender and got a $500 loan for two-weeks.

She didn't have the $575 to cover the loan and interest, so she visited another check cashing store.

Overall, she took out loans from four different companies and still couldn't pay her regular bills.

"Paying between $600 and $800 a month got really bad," Spencer said.

News that Ohio Governor Ted Strickland signed legislation Monday clamping down on payday lenders had her smiling.

The law takes effect in 90 days.

It caps at 28% the Annual Percentage Rate (APR) that check cashing stores can charge.

Previously, it reached as high as 391% for two-week loans.

"I think that's wonderful," the mother of two said. "I hope people don't get out any at all because it puts you in a trap."

Industry observers sang a different tune about House Bill 545.

"It's an unworkable piece of legislation," said John Rabenold, vice-president of governmental affairs of Mason-based "Check 'N Go."

"It's unfortunate for customers. It's unfortunate for our employees," said Rabenold. "Neither group was really heard in the whole debate."

Rabenold said Check 'N Go is studying whether to curtail operations in Ohio and cut jobs.

Leaders of the Community Financial Services Association of America says that's already happening.

"In passing this legislation, Ohio's elected officials chose to turn their backs on their constituents and play politics," said CFSA President D. Lynn DeVault.

"Politics have real life consequences," he continued. "Many payday lenders have already stopped making loans. Others are laying off employees and closing stores."

Nick DiNardo, with the Legal Aid Society of Southwest Ohio, called the signing of HB 545 a, "victory for the working people of Ohio."

"The rates that payday lenders were allowed to charge were completely unconscionable," DiNardo said. "This makes the access to credit fairer to all people in Ohio."

HB 545 affects loans in the future, not those that have already been made.

The interest rate will come down because money will have to be offered over terms longer than two weeks, according to DiNardo.

That will make it easier for customers to pay back the money in smaller increments that they can afford.

LaMonica Sherman, of Mount Healthy, borrowed money from a payday lender when she got behind on a couple of bills.

However, she said the experience left her frustrated.

"I borrowed the money," she said. "I had to pay it back and then had to reborrow it again to keep up on all my bills.

Sherman added, "It looked like a way out, but it's really a trap."

DiNardo says people like Spencer and Sherman should now contact their lenders and try to work out repayment plans that they can afford until the loan or loans can be paid off.

"What consumers don't want to do is ignore these things and have them come back and get sued six months or a year later," DiNardo warned.

Sherman says she sees both payday lenders and the new regulations as a double-edged sword. The firms serve a need, but going to them can put people behind.

"These payday loan places have been like a cushion, but it hasn't been a real good cushion," Sherman commented.

She says if many of them close, people will still need assistance.

DiNardo suggests a credit union.

Check 'N Go's Rabenold says consumers are now worse off than they were before.

"They had a very well-regulated, well-defined, short-term credit option that they would use when they seek small amounts of money for short periods of time," he said. "That option is no longer available to them."

What will they do? Rabenold suggested that many will now go out-of-state for payday loans or seek help via the Internet.

"Or, quite simply, they'll just bounce more checks and pay bills late," he concluded.