Payday loans in Ohio
The MidWestern state of Ohio is the 7th most populous and its location, which links the North East and the Midwest, has been advantageous for expansion and the growth of the economy. During the financial crisis of 2008, Ohio was hard hit especially in the automotive industry and over 100,000 job were lost as the country came to terms with the unfolding economic crisis.
At that time the unemployment rate was 7.2% as businesses like GM and DHL laid off workers and closed plants. Since that time Ohio has improved economically but there are still a large number of residents who rely on payday loans when a financial crisis hits the family.
A little background to Ohio
Ohio is a mix of rich and poor with both sets of residents paying high taxes. The climate is humid and hot in the summer and winters are cool to cold. There is occasional severe weather but the state does not get many tornadoes and growing crops is one of the great sources of wealth.
Agriculture and manufacturing are the two largest drivers of the economy and the state of Ohio produces corn, wheat, hay and oats. Cincinnati is a base for manufacturing with automobile factories including Camargo Cadillac and Columbia Chevrolet. The state joined the Union in 1812 and was the 18th state. There are three capital cities although the main one is Columbus which is 14th in the list of the largest cities in the US.
The capital has a diverse economy with many jobs in banking, education, health, defense and technology. According to Forbes magazine, Columbus was voted the best city for working moms and is rated as one of the most business friendly in the country.
Population of Ohio
In 1800 there were just 45,000 people living in Ohio and this figure has now risen to over 11,000,000. There are a large number of young children and 6.2% of the residents are under the age of 5. White Americans make up 82% of the population.
Economy of Ohio
The economy in Ohio was rated seventh largest of the 50 states and the state is considered to be excellent for business. In spite of setbacks suffered during the 2008 recession, Ohio has bounced back although the unemployment figure is higher than some other regions of the US.
The number of people out of work stands at 5.2% and the number of available jobs are lower than in pre recession 2007. The average income in Ohio is $51,075 and this is $4,700 lower than the national average. In April 2017, figures showed that the poverty rate was down but there are still thousands of families who are struggling to make ends meet. The overall poverty rate is 14.8% with child poverty figures showing as 21.2%, a figure that is higher than normal in the US.
With so many people failing to get enough income to meet their basic needs the use of payday loans is understandable. In addition, the rules for payday loans in Ohio are more complicated than in many other states and this has made the situation for low income families worse.
Legal payday loans
Payday loans in Ohio are legal and in 2005 borrowers took out loans that attracted fees of more than $230 million. There were calls to lower the high interest rates and in 2008 a law was passed limiting the rate of interest to 28% APR.
However, instead of operating under the auspices of payday lending regulations, many lending businesses in Ohio have chosen to register as small loan lenders and this allows them to avoid the capped rate.
Payday loans in Ohio are legal and in 2005 borrowers took out loans that attracted fees of more than $230 million.
The result is that most lenders are charging well over 600% APR and at this point there are no imminent plans to close the legal loophole. Bearing this in mind, here are the regulations that relate to real payday loans.
Main terms for payday loans in Ohio
The maximum amount of a loan is capped at $500. The maximum interest rate allowed is 28% APR. This limits charges to £1.08 on a loan of $100 that runs for 14 days. The interest rates and fees are very low but as already stated most lenders avoid these caps by registering as small loan lenders instead of short term lenders.
Limits of debt
Loans must not run for more than 31 days, no rollover loans are permitted and there must be a break of 90 days between each loan. Borrowers may not have more than four loans each year.
Limits of collection fees
Lenders can charge a collection fee of $20 and if the loan goes into default the lender may ask for court costs and damages for the unpaid debt.
Bad lending practices in Ohio
Many lenders who purport to offer payday loans are exploiting the law by offering triple digit interest rates and also operating car title loans which are not legal. Under the Second Mortgage Loan Act, lenders make direct loans and under the Credit Service Organizations Act they act as brokers for third party lenders. In spite of the low interest rate cap, the legislature has failed to bring these lenders to order and the fees racked up annually by borrowers runs into over $500 million.
Licensed lenders in Ohio
Permission to operate as a lender is provided by the state government and all lenders must apply for a license. The background check costs them $200 and the license is $500. Lenders must prove they have enough assets to operate legitimately and ethically. In addition, they must have a good history and be financially responsible.
From the statistics it look as though the government is not doing anything to prevent lenders from providing triple digit interest rate loans and many families have fallen into serious amounts of debt.
Loans in 2015
The Center for Responsible Lending produced an analysis in 2015 showing that there were 735 storefront lenders in Ohio and over 2.5 million loans were sold amounting to $910, 922,756. The sum taken in fees was $184,461,756.
Yellow Pages lists 1695 payday loan stores in Ohio. Lenders who offer payday loans online do not need a license unless they also have store premises in the state. And, online lenders do not have to abide by the interest rate cap or regulations for fees and charges.
Therefore, when taking out a loan with an online lender it is important to read the fine print details of the agreement as there is no comeback under the law if high interest rate charges or extra fees are imposed.
Customers using payday loans
A report shows that 6% of the adult population in Ohio used a payday loan in 2015/2016. The average amount borrowed was $408 which is higher than in other states. 56% of women used loans compared to 44% of men.
The highest amount of loans were taken out by the 18 to 24 age group and people earning the lowest wages (up to $15,000 per year) also took out the most loans. 43% of borrowers were in full time employment and this reflects the low wages factor which often drives families to use high interest rate short term loans.
Legislation for payday loans in Ohio
The Ohio Division of Financial Institutions is the regulator for payday loans. All lenders in the state must operate with permission of the regulator and the license must be displayed in the office for potential clients to see. The loan contract must contain the loan amount, term of the loan, interest rate, fees and the relevant date for repayment. Both parties must sign and keep a copy of the agreement. If you have experienced a problem with a payday loan you can contact the regulator at the address below:
Ohio Division of Financial Institutions
77 S High Street 21
Finding a responsible lender
The strict rules of payday loans in Ohio have led many lenders to circumvent the regulations. Most companies complain that they are unable to make profits under the strict rules and have exploited a legal loophole by registering as a different kind of loan company.
Unfortunately, the need for payday loans is so great that many borrowers accept the higher rate of interest and end up paying very high annual interest rates. However, there is a way to ensure that the loan you take out is legal and will not lead to serious debt. Using an online lender allows you to consider all the terms and rates of the loans before you sign the agreement.
Online lenders in Ohio
As online lenders operating in Ohio do not have to keep to the regulations laid down for those operating from a store, there is a greater opportunity to find a better deal. You can use a money comparison website to find a lender that offers a lower rates and as the number of online providers is on the increase and competition is higher, in the future there is going to be a lot more choice.
Applying for an online loan
An application for an online loan is quite straightforward. You need to provide proof of your identity and age using a driving license or passport and lenders also require details of your social security number and proof of income.
Funds from an online loan will be sent directly to your bank account so you also need an open checking account and to give the lender authorization to access the account. When repayment of the loan is due the lender will automatically withdraw the amount to be repaid including interest and any charges. The flexibility of online lenders is a good reason to explore this direction if you want a loan and there are also other benefits.
The flexibility of online lenders is a good reason to explore this direction if you want a loan and there are also other benefits.
Online lending is anonymous and confidentiality is assured. You can carefully check the term and conditions of the loan before committing to a contract. And, by taking time to check out the best rates you will end up paying less in interest charges. Used sensibly, an online payday loan is a good short term borrowing option for people who live in Ohio.
Getting help with debt
If you think that a payday loan is not going to be suitable or if you feel that you would be unable to pay for a loan out of your next paycheck, there are places that can help. In Ohio there are two assistance programs that provide help if you are not coping with everyday bills. The Emergency Food Assistance Program and the Home Energy Assistance Program will help with high energy bills and food. There is also the Medicaid Program which can come to the assistance of anyone who is unable to pay high medical bills.
Summary of payday loans in Ohio
Payday loans in Ohio have strict regulations but lenders have found a loophole that allows them to avoid the rules by registering as a different kind of lender. Real payday loans are limited to $500 for a period of not more than 31 days and the interest rate is capped at 28%APR.
Any other loan product should be approached with caution and it is also important to emphasize that a payday loan should not be used top up your salary. Make sure to read and understand all the term of the contract before signing an agreement.