By Frank Lewis
U.S. Senator Sherrod Brown (D-OH) has come out swinging against payday lenders and car title lenders in calling for the Consumer Financial Protection Bureau (CFPB) to offer more protection for American households who use small dollar loans.
On average, borrowers take out eight payday loans a year, spending $500 in interest for a $375 loan, according to U.S. Senator Sherrod Brown (D-OH).
“Ohioans should not be trapped into a lifetime of debt from predatory loans,” Brown said. “Ohio’s General Assembly and Ohio’s voters seem to agree. They both have passed laws to limit the triple-digit interest rates and deceptive practices that these short-term lenders use.”
“In 2008 Ohio voters enacted a rate cap of 28 percent,” Diane Standaert, director of state policy for the Center for Responsible Lending, said. “The cap was an effort to rein in out-of-control practices that were draining over $239 million in fees from Ohioans every year at that time.”
Standaert said the payday lenders fought the move and forced a ballot initiative which they lost.
“More than 64 percent of Ohio voters supported this rate cap, but the lenders did not give up,” Standaert said. “Instead they exploited a loophole in the law and continued to make loans with triple-digit interest rates, claiming that these rate caps did not apply to their business model.”
Brown said payday lenders skirt consumer protections by reorganizing their business practices to a different section of the law.
The Center for Responsible Lending report, according to Brown, shows how payday and car title lenders have “exploited loopholes in Ohio law,” and continues to saddle borrowers with triple-digit interest rates.
Brown said, at last count, there were 836 payday loan stores in Ohio and generates $500 million each year.
“There are more payday lending stores in the United States than there are McDonald’s or Starbucks,” Brown said. “That’s why the Congress created the CFPB in 2010 to fill the gaps and oversight of these shadowy financial markets protecting the 43 percent of American households who use small dollar loans at some point in their lives. Almost half of Ohioans do at one time or another.”
Brown said he sent a letter in June to the CFPB urging it to enact the strongest consumer protections possible to make sure those products are affordable and sustainable.
“It has now been more than five months since that letter,” Brown said. “It’s time CFPB to act.”
Brown said the rules should include limits on cost; requirements to ensure customers can repay their loans; products with longer repayment terms and the ability to pay down loan principle.
According to one payday Loan Company, A payday advance is a small dollar short-term advance used as an option to help a person with small, often unexpected expenses. Payday Loans are short-term in nature and not intended to be used long-term or for larger purchases like a home or a car.
Reach Frank Lewis at 740-353-3101, ext. 1928, or on Twitter @franklewis.