Payday lenders react to bill

By SHELBY SCHROEDER

Two of the largest companies plan to close their Ohio locations.

Many pay advance companies have announced they will close their Ohio operations after the Senate’s approval to cap loan rates last week.

Legislation approved Wednesday will cap the interest rates charged by so-called payday advance companies to 28 percent. Companies have said the rate is too low; supporters of the bill say reported lending rates upward of 390 percent worsen financial problems for borrowers.

Check Into Cash, a cash advance provider with eight locations in Trumbull and Mahoning counties, said it will close all 93 of its stores in Ohio. Judy Powers, company spokesperson, said the closings depend on whether the company can offer new services. Another payday lender, Cash America, also announced plans to close 139 of its Ohio lending sites in coming months.

Industry spokesmen estimate 6,000 employees of the payday loan businesses in Ohio, including 220 from Check Into Cash, could be terminated by year’s end.

Mike Dohar, the owner of four local Midwest Money Centers, said about 75 percent of his company’s revenue is derived from the payday loan business. His stores also perform check cashing and bill payment services.

Dohar said his clients, who are primarily lower income, will have few alternatives if payday loan centers close. He said remaining choices include asking a friend or family member for money, charging a credit card, bouncing a check or not paying bills at all.

“But then they’re going to shut your utilities off — is that a good choice?” he asked.

According to the Center for Responsible Lending, a nonprofit organization that seeks to protect individuals from bad loans, the majority of families taking out payday advances are caught in long-term debt. Additionally, the center states that short-term loan periods “ensures that cash-strapped borrowers will be unable to pay off their loan with a single paycheck,” creating more debt.

Dohar said that he and many others are unfairly portrayed as predatory lenders with outrageous lending rates. He said that he charges flat rate fees, rather than interest and that he arranges payment plans for people who cannot pay their bills on time.

Instead of eliminating lenders’ profits, he argued consumers should be educated as to how to properly use payday advances.

“There will always be people who abuse their freedom of choice,” he said. “[But] every time the government tries to protect the consumer from themselves, they’re really hurting them.”

Dohar said he’s unsure what will become of his stores.

Powers, from Check Into Cash, said the company will try to salvage its business but had no set plan yet.

“Hopefully we can come up with something,” she said.

Gov. Ted Strickland plans to sign the bill into law once he receives it from the Legislature.

Dohar said he expects the government will see more problems arise from the bill.

“In three months, they’re going to scratch their heads and go, ‘What are we going to do about this?’”

sschroeder@vindy.com