Payday lending: helping hand or trap?

Frank Sinkovich is proud to be a payday lender.

He figures the loans from his Boardman business help people keep their electricity turned on or pay a bill without bouncing a check.

“We’re a service for people who have a temporary need and no one else to turn to,” said Sinkovich, manager of Abe’s Cash Advance, 4605 Market St.

But some people are working to turn off the cash that flows freely from businesses such as Abe’s. Borrowers now can receive two-week loans of up to $800 simply by having an income and a checking account.

Critics, however, say payday lenders aren’t helping people who are low on cash — they are trapping people into a cycle of debt.

State Rep. Robert Hagan of Youngstown, D-33rd, has joined with critics by co-sponsoring legislation that would drastically curtail the fees and interest that payday lenders can charge.

Most payday lenders are operated by national corporations, but Sinkovich decided to open Abe’s in 2004 with the help of partner Anthony Thomas, a local appraiser and property manager.

They make money, but they help people, too, said Sinkovich, a retired insurance agent.

If someone doesn’t have the money to pay an electric bill and is going to get service cut off, his business can step in to give that person a loan for two weeks.

The electricity stays on, and the person can pay back the loan — plus fees and interest — from his next paycheck.

He figures it keeps people away from crime.

It also must be a good way to make a profit. Payday lenders have sprung up all around Ohio since they were first authorized by state law in 1995. As of 2006, Ohio had nearly 1,600 payday lending stores, including 99 in the Mahoning Valley, according to Policy Matters Ohio.

Opponents are concerned by the explosive growth, which they say is being fueled by people’s misery. For many, payday lending is a debt trap that’s hard to shake, said James Callen, executive director of Northeast Ohio Legal Services in Youngstown, the group that provides free civil legal aide to low-income people.

Borrowers from payday lenders often don’t have enough cash to pay the fees and interest even after their next paycheck, he said. So they take out another payday loan to repay the first one and are charged more fees and interest, he said.

Read the full story Monday in The Vindicator and on Vindy.com.