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Payday Loans in Ohio
Payday loans are short term high interest loans for small amounts of money, often ranging from $100-$1000. You’ve probably noticed “payday advance” storefronts in lower-income areas. This is not by accident. It’s an unfortunately effective strategy by payday lenders to take advantage of people more likely to have limited access to other forms of less expensive credit.
Here’s their plan.
A payday lender targets a lower-income area so that when life happens and cash strapped people need a couple of hundred dollars, a payday loan will be readily accessible. When you’re desperate for $200, the terms and conditions don’t seem too bad. And that’s what payday lenders count on.
Desperate borrowers give payday lenders access to their checking accounts, and even titles to their vehicles as collateral. When the time comes to pay the loan back, many are unable to do so. As a result, they simply roll the loan over and continue racking up fees and interest.
If someone misses a payment, payday lenders take money out of their checking account. This leads to additional overdraft and other bounced payment fees.
For many, it’s a long cycle of debt that starts with less than a thousand dollars.
Laws Protecting Consumers in Ohio
In 2008, Ohio enacted the Short Term Loan Act, aiming to protect consumers from the abusive practices of payday lenders. The Act capped loan amounts and interest rates and mandated other favorable terms for borrowers. However, many payday lenders circumvented these consumer protections by using mortgage lending licenses and lending money under the Mortgage Lending Act.
In 2014, the Ohio Supreme Court ruled that this practice was legal and would continue unless and until Ohio legislators changed the law to ban it.
This practice continued for years, making Ohio one of the most expensive states to take a payday loan, with interest rates reaching up to 677%, according to the Center for Responsible Lending.
But in 2018, Ohio enacted a new law governing payday lenders. This capped interest rates at 28%, made the max loan amont at $1,000, kept terms betweeen 91 days and 1 year, and discontined rollovers.
Despite these recent protections, payday loans did a lot of damage and are still never a good idea.
Questions About Debt? Contact LHA
Payday loans are still extremely risky and will cost much more than you anticipate. Try to avoid taking out a payday loan if at all possible.
Whether or not you were affected by a payday loan, if you’ve found yourself trapped in a cycle of debt or are a victim of abusive lending practices, a consumer law attorney may be able to help you. Call the Ohio consumer lawyers at Luftman, Heck & Associates at (888) 726-3181 for a free consultation.