Payday lenders skirt law
On Nov. 4, 2008, "Ohio voters stripped payday lenders of their permit to fleece working people," said Bill Faith, one of the leaders of a successful referendum to limit interest rates on short-term loans.
But after that overwhelming defeat, the short-term lending industry dusted itself off and got creative.
A CentralOhio.com investigation shows payday lenders are making as much, if not more, on their loans as they did in 2008. And after a two-year, behind-the-scenes battle, state banking regulators admit they can't do anything about it. Only the Legislature can, they say -- and lawmakers have no plans to take up the issue.
How did this happen? Instead of paying out loans in cash, documents show, payday lenders cut checks to their clients. They then offer to cash those checks for a fee somewhere between 6 to 10 percent of the value of a check, or $30 to $50 on a $500 loan, according to loan documents and officials familiar with the practice.
Payday executives argue that the state has relented because their actions are within the bounds of the law. Those rules are unlikely to change, they say, because customers demand their product.
Faith remains a steadfast critic of payday lending in Ohio. He said the short-term lending industry is constantly working around the spirit of regulations.
"They are a creature of legislation. They can't exist without it," he said.
"Some states have banned them, some states have never allowed them, some states put interest caps on them. They are vigilant about prioritizing their legislative battles."
State inspectors first discovered the check-cashing fee in February 2009 at Quik Cash locations in the Cleveland area, according to documents filed in an ultimately unsuccessful Department of Commerce hearing to revoke the chain's licenses.
That's less than three months after a law took effect limiting short-term lenders to assessing an annual percentage rate of 28 percent, or about 38 cents of interest per day on a $500 loan.
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Inspectors found that a third of Quik Cash's Cleveland-area customers cashed their checks on site in September 2009, according to the hearing documents obtained through an Ohio Open Records request. So a $500 loan from Quik Cash that would net about
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