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Payday lenders take advantage of loopholes

Re "Consumers want option of small-dollar loans," June 1: Ted Saunders, chief executive of CheckSmart, says that with Ohio experiencing an economic downturn, people need reliable access to short-term credit. This is certainly true. What Ohioans don’t need is high-cost, short-term credit that they can't repay.

The new payday loan products being offered are similar to the old payday loan products that led the Ohio legislature to amend the payday loan law in 2008 to reduce costs to borrowers.

Unfortunately, there were loopholes in laws that licensed other forms of loans, and the payday lenders have sought to maintain their high-cost structure by migrating there.
 

Payday lenders take advantage of loopholes

Re "Consumers want option of small-dollar loans," June 1: Ted Saunders, chief executive of CheckSmart, says that with Ohio experiencing an economic downturn, people need reliable access to short-term credit. This is certainly true. What Ohioans don’t need is high-cost, short-term credit that they can't repay.

The new payday loan products being offered are similar to the old payday loan products that led the Ohio legislature to amend the payday loan law in 2008 to reduce costs to borrowers.

Unfortunately, there were loopholes in laws that licensed other forms of loans, and the payday lenders have sought to maintain their high-cost structure by migrating there.

The costs of the loans under the new law are still extremely high. The law requires that lenders disclose the annual percentage rate, which considers both the interest and also the origination and other fees that the borrower must pay up front, so that it is possible to compare the true costs of loans.

The annual percentage rates on these new loans are usually around 125 percent or higher for a loan that lasts a month, and near 378 percent for $200 loans lasting the traditional two-week payday loan period.

People need access to affordable small loans, but the industry has shown it will charge the maximum the law allows. HB 486 would prevent multiple fees for renewing payday loans within a three-month period.

It will also prevent multiple fees for brokering loans or cashing a payday loan check. This is a step toward allowing people to get themselves out of payday loan debt.

Stanley A. Hirtle
Dayton