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The Ohio House budget could create an Ohio state database that monitors Payday loan consumer payday loans.
Veritec Solutions, a Florida company that creates, manages and advocates aggressively for payday loan tracking databases is pushing pretty hard.
Payday loan lenders and the consumer advocates who hate them are united in opposing the database. Wait? That's not possible, is it? They are united? That should be the headline!
Read more here: Payday Loan Lenders and Consumer Protectionists Unite!
In May 2008, the Ohio State Legislature passed a law capping the interest rate on small consumer loans at 28%. Of course, residents of Ohio still access the payday loan product via payday loan Internet web sites, call centers and other approaches discussed below.
Ohio payday loan companies operate similarly to those in North Carolina and a few other states. The smaller payday loan players tend to give up and close shop but the larger, sophisticated payday loan companies are employing several creative approaches.
One of these is to charge 28 percent interest on loans of a few hundred dollars and charge borrowers a $15 application fee and $10 for a credit check.
Additionally, aggressive lenders are paying their customers with a check so they can charge them an extra fee to cash it.
ADDITIONAL NOTE: Ohio payday loan operators are switching over to Ohio Mortgage Loan Licenses, under the Ohio Mortgage Loan Act, and operating under the Ohio Small Loan Act.
The Ohio Small Loan Act governs non-depository lenders who make loans to $5000 not secured by liens against real estate. Lenders can calculate interest by charging a maximum 25 percent on the entire loan amount or 28% on the first $1000 and 22% on the remainder of the loan up to $5000.
The Ohio Mortgage Loan Act governs lenders who make unsecured loans and loans secured by real estate or other personal property. The maximum rate is 25% with no loan amount limit.
Ohio payday loan operators are generating additional fees and increasing their margins by charging one-time setup fees, origination fees, check cashing fees, etc. For example, the Ohio Small Loan Act allows lenders to charge a fee of $15 or 1 percent of the loan amount; whichever is greater.
If you're interested in entering the Ohio payday loan industry, GO GET A LOAN at one of the largest existing payday loan companies you can find. Get copies of EVERYTHING! It's the large lenders who spend significant money on compliance and contract language. Emulate the "big guys."
CAVEAT: Perform due-diligence! Things change; laws change.
We suggest you concentrate your research on the Payday Loan Internet Model and the Credit Services Organization as described here. Although our discussion focuses on the Texas Credit Services Organization Model, you and your team may determine it is appropriate for a multiplicity of states.
Ohio’s attorney general has approved proposed language for use in a petition drive seeking to repeal new payday loan regulations set to become effective in 2009.
Supporters of the payday loan industry required AG Nancy Hardin Rogers to OK the language for petitions seeking to get a referendum for the law’s repeal on the November ballot.
Rogers approved as "fair and truthful" the petition drive’s summary of the pertinent portion of the law.
The new law, if it actually becomes effective in 2009, caps annual interest rates at 28%, down from 391%.
Gov. Ted Strickland on June 2 signed the bill that puts the new restrictions into effect. Payday lending businesses point out that the law change would force them to close offices, lay off thousands of employees, and remove another financial choice Ohio residents currently have .
Rather than regulate the payday loan product out of business, if the new law were to take effect, it would force Ohio payday loan consumers to apply for payday loans via the Internet or call centers.
Regulators cannot put an end to demand for payday loans! At best, they simply force consumers to reveal their social security and bank account information to payday loan companies residing in other states or offshore.
Additionally, the state loses the revenue derived from licensing and auditing, employment and sales taxes. It’s ridiculous!! Why not let the market dictate rates and fees by allowing competition to exist? Guess they THINK they know what’s best for ALL of us.
We like the fact that the payday loan industry remains creative and optimistic about its future. Could that be because we interface with our customer every day thus gaining tremendous insight into their needs? Unlike those who continue to attack our industry without doing the work necessary to understand the payday loan industry and our customers?
Ohio regulators recently decided they know what’s best for all of us by attempting to destroy our product and reduce the financial choices available to their residents. This despite the fact there have been virtually zero complaints by consumers regarding our industry.
Had the regulators attempted to learn as much about the payday loan customer as we have, they would have learned our product cannot be stopped. By eliminating the ability of payday loan stores to maintain physical locations in their state they have simply forced residents of Ohio to secure their small $200 to $1000 emergency loans from payday loan call centers and Internet sites residing in other states and offshore.
Thus the state of Ohio loses licensing fees, auditing revenue, jobs for Ohio residents (estimated to be 6,000+) and, most importantly, the ability to protect their residents from abuse, due-process, and privacy concerns.
Meanwhile, us pesky payday loan operators are creatively developing new products and methods in order to continue to help residents of Ohio meet their emergency financial needs AND make a buck.
Since controversial House Bill 545 first cleared the state House of Representatives in April, six payday lending companies have sought licenses to make loans under the state’s Small Loan and the Ohio Mortgage Loan acts. Not as lucrative as payday lending, short-term loans permitted under either statute can be made with the equivalent of triple-digit annual percentage rates - similar to the combination of fees and rates that prompted lawmakers to target the industry with H.B. 545.
Payday lenders still must determine if we can remain profitable by making small, short-term loans, and face the legal difficulties. But these license applications indicate those of us in the payday loan industry are not willing to quit Ohio, our customers, or our revenue streams.
"We’re looking for ways to continue to service customers," said Jeff Kursman, a spokesman for Mason-based Check ‘n Go, which applied for 73 lending licenses under the Small Loan Act. "Nothing is off the table."
For a thorough discussion of the payday loan industry and access to our payday loan training materials, we recommend you proceed to Payday Loan Industry.com