Payday loans a tough business
Last year, the Ohio payday lending industry and its advocates fought to get harsh restrictions in the state overturned, but the policies stayed put.
This year, more than a third of the payday loan businesses in the state have closed down, much to the dismay of their former customers.
Regulated out of business
Ohio law places a cap on fees that payday lenders can charge, and it limits residents to four per year. Businesses warned that these laws would shut them down, and now that has become a reality.
Chron.com says:
There were about 1,600 retail locations across Ohio when the new interest rules went into effect last year, state officials said. About 960 remain, and those are under fire from critics who want to enact even tougher rules beyond the 28 percent cap on interest.
Struggling to survive
Payday lending in Ohio used to bring in a decent amount of business in Ohio. At least that’s what this guy said:
“The change has been a tremendous blow to the company,” said Ted Saunders, chief executive of Columbus-based CheckSmart. “I’ve closed 10 or 15 stores, and I’ve got more on the watch list. We were on a growth spurt until this happened.”
Words from payday loan users
Payday loan company owners aren’t the only people who object to the harsh restrictions and subsequent shutdowns. Some payday loan customers talked to Chron.com:
Some customers still say that payday loans are best for their needs.
“Are you going to loan me $200 for two weeks for $30? I don’t think so,” said Linda Coleman, 28, a machine operator and nursing student from suburban Colerain Township.
She was at a CheckSmart store in suburban Kenwood borrowing money to cover her quarterly water bill, and said she uses short-term loans about once a month.
Johney Easterling, 47, a maintenance worker from suburban Deer Park, said he borrows money about five times a year and doesn’t object to the fees.
“I think it’s a pretty good service when you need a little change, you can get it,” he said. “If you can afford it, do it.”
Regulations pass in South Carolina
After a four-month impasse, new payday loan regulations have passed in South Carolina. S.C. Politics says:
The compromise raises the maximum payday loan amount to $550 from $350, and limits outstanding loans to one at a time by way of a database that will track borrowers.
Borrowers would have to wait one day between loans, and after consecutive loans a two-day cooling off period would be in effect.
Other provisions of the compromise are that borrowers would have a 24-hour to change their mind on taking out a loan, meaning they could cancel the transaction within 24 hours if they chose.
If borrowers get trapped in a loan they cannot repay, they could enter an extended payment plan, once per year, which would allow their loan repayment to be broken into four equal payment dates.
It’s tough to say how these changes will affect the industry. Allowing payday lenders to give bigger loans will definitely be helpful to customers, and limiting customers to one payday loan at a time is a good practice because it helps keep consumers out of trouble.
Overall, the changes in South Carolina will likely have positive effects.
I can’t believe Ohio passed such watered-down restrictions.
Payday loan lenders continue to skirt short-term loan laws by charging excessive origination and credit check fees and high fees to cash the money orders, according to a survey of 69 loan stores released Tuesday by Policy Matters Ohio.
Clevland researchers conceded that people in Ohio may not have many options. Banks have set more higher standarts to get line credit cards and now make 60% of their income.