Payday lenders still overcharge, despite Ohio law, study shows

By Marc Kovac

COLUMBUS — Payday lenders continue to charge triple-digit interest on short-term loans, despite actions by lawmakers last year to stop the practice.

That’s according to a study released Tuesday by Policy Matters Ohio, a Cleveland-based nonprofit that studies economic policy issues.

The group visited or called 69 payday lending stores in the state, seeking information about the interest rates and fees charged on their short-term loan products. Every location contacted is charging triple-digit interest — some topping 600 percent.

Legislation passed by lawmakers and signed by the governor last year was supposed to cap the annual percentage rate charged on short-term loans at 28 percent. The new law also limited the number of loans that could be issued to individual borrowers, prohibited obtaining new loans to pay off old ones and required consumer- education courses for repeat borrowers.

But a study released earlier this year by the Housing Research and Advocacy Center, a Cleveland nonprofit, stated that there were more than 1,000 payday lenders still doing business in Ohio and offering short-term loans at inflated rates.

Those lenders are operating under the state’s Small Loan Act and Mortgage Loan Act, both of which allow them to charge rates comparable to or higher than those allowed under the prior payday-lending law.

In its study of lending practices, Policy Matters Ohio noted that locations it surveyed continue to make loans due on the borrower’s next payday, charge fees for cashing the loan checks they issue and are making larger loans than are permitted under state law.

“These loans are not designed for people to pay them back on time,” said David Rothstein, a researcher at Policy Matters Ohio. Legislation has been introduced in the House to close the loopholes allowing the high rates.