Payday loan industry seeking new approach

CINCINNATI (AP) — The payday loan industry, which lost a ballot fight to overturn tough restrictions on the interest rates it can charge costumers, is searching for other ways to do business in Ohio as consumer advocates worry that lenders are finding a way around the election results.

Lenders are focusing more on services such as pawn brokering and gold buying, and some are applying for licenses under other Ohio loan laws.

Consumer advocates plan to take a close look at what lenders are doing. Ohio’s new law cuts the interest rate that payday lenders can charge from an average 391 percent annual rate to 28 percent and limits the number of loans customers can take to four per year. It is among the strictest laws in the country.

“Whenever states reject payday lenders, they try to find other ways to keep trapped customers coming back to their stores to keep generating the same fee income off of them,” said Uriah King, policy associate for the Center for Responsible Lending that lobbies against payday lending. “They look to other laws, rename their product or rename a fee, saying it’s not a fee but just a service.”

Since May, six months before Election Day, the state has received 568 applications from payday lenders seeking to provide loans under the Ohio Mortgage Loan Act and 702 applications from lenders interested in offering loans under the Small Loan Act.

The Small Loan Act governs non-depository lenders who make loans up to $5,000 not secured by liens against real estate.