Controversy surrounds payday lending
Measure would cap annual interest at 36 percent
July 21, 2008
MOUNT VERNON — Need some quick cash? For a fee, residents can go to any number of local payday lending offices for a short-term loan to get help get them to the next pay check.
Consumer advocates call such loans predatory. The pay day lending industry say they provide an important service for consumers who have nowhere else to turn. Caught in the middle are state lawmakers, who have proposed legislation to regulate the payday lending industry and plan to tackle the issue again next year.
The pay day lending industry has grown considerably in the last 10 years, locally and statewide. There are 10 such offices in Knox County, most of which are in Mount Vernon. A decade ago, there were none. This local trend is consistent with the growth of the industry statewide. The number of payday lending offices in Ohio has grown from 107 in 1996 to 1,562 in 2006, according to a report from the Policy Matters Ohio, a nonprofit Cleveland based research group, and the Housing Research and Advocacy Center.
The fee payday lenders charge in Ohio is about $15 per $100, with a maximum loan amount of $800. The borrower writes a post-dated check. The lender agrees to hold the check until pay day, at which point the borrower can buy back the check. They can also renew the check for another two weeks, which is sometimes called flipping the loan. It is this flipping that draws fire from industry critics, who argue that payday lenders lead borrowers into an endless cycle of revolving debt.
If the borrower does not buy back the check, the lender can cash the check. If the check bounces, the borrower will find themself in court and subject to the amount of the loan, interest and bounced check fees.
Many civil cases involving unpaid payday loans come to the Mount Vernon Municipal Court. A survey of court records shows First Check Cash Advance, which has two offices in Mount Vernon, has been named as the plaintiff in 411 civil cases relating to payday loans since 2001.
Municipal Court Judge James Spurgeon said cases involving bounced checks written to payday lenders are not considered criminal, but civil. He said the payday lenders accept the post-dated check knowing that the money is not in the bank. Commercial businesses, such as a grocery store, on the other hand, do have a reasonable expectation that a consumer has the money in the bank when they write a check. For this reason, the cases are handled in civil court.
The Rev. Keith Stuart of First Congregational Church of Christ in Mount Vernon disagrees, and said he and other members of the church have been discussing the growth of the industry locally.
Source :
http://www.consumeraffairs.com
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