Payday Loan Lenders Avoiding Regulations

Mon, 21 Sep 2009

Payday loan lenders in Ohio are using loopholes to try to sidestep the new regulations which govern their practice. Voters last year approved a state law capping annual interest rate on short term loans at 28 per cent, a massive reduction from the 391 per cent some payday loan lenders previously charged. 736 lenders closed in the wake of the new legislation, though 835 remained open and are making use of other sections of Ohio’s law and charging extra fees.

A new study from Policy Matters Ohio revealed that that while the cost of short term loans has been reduced slightly, lenders are now adding on extra fees such as credit investigation fees. A typical two week £300 loan will now cost $318.62, with $3.62 in interest and a $15 origination fee. There is a further fee if borrowers wish to cash the cheque at the store, with a typical lender charging a $3 fee on every $100 cashed. Customers aren’t forced to cash their cheque their, but more than a quarter of customers voluntarily pay the fee.

With the lessons of the credit crunch still fresh in the mind, not all applicants are successful. Customers tend to be in their early 30s, own homes and earn between $25,000 and $30,000 a year.
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