Beware of predatory lenders in Appalachia

Melissa Martin, Ph.D.

An animal predator hunts down prey and kills it, then eats it. A payday loan company entices individuals with fast cash, kills their payoff with high interest rates and eats their cash flow. Consumers, beware of these wolves in sheep’s clothing.

What is Predatory Lending?

Payday loans are advertised as a quick financial fix, but a long-term debt trap snares individuals into repeat borrowing at high interest rates. An emergency loan becomes a disaster for your budget. When borrowers cannot repay the loan, it’s rolled into a new loan, so the cycle of scam and swindle continues.

Payday loans, cash advances, installment loans and car title loans plunge low-income consumers into debt devastation and despair when they cannot repay loans. And lower credit scores even lower.

Payday Lending in Ohio

Ohio’s market consists of more than 650 payday loan storefronts in 76 counties, according to Pew Charitable Trusts.

Director Richard Cordray oversees The Consumer Financial Protection Bureau in Ohio. How is he solving the payday lending problem?

House Bill 123: Modify short-term, small and mortgage loan laws was introduced in 2017, passed the House on 4/19/2018, but needs to pass in the Senate.

Leaders of the coalition, Ohioans for Payday Loan Reform, are calling for strict interest rate caps at 28 percent and for closing any loopholes around that cap, according to a 2018 story in the Cincinnati Enquirer.

In 2017, Ohio was identified among four other states with the highest fee drain amounts (a half billion drained from each state) from predatory lenders.

A 2016 report from the Pew Charitable Trusts revealed payday lenders in Ohio charge the highest interest rates in the U.S. with a typical annual percentage rate (APR) of 591 percent.

In 2015, the Ohio Consumer Lenders Association, which represents payday and title lenders, gave $100,000 to a campaign to reform Ohio’s legislative redistricting process. It appears there’s weasel in the henhouse.

Predatory lenders found a loophole in the 2008 Ohio law by obtaining licenses to operate as credit service organizations in order to issues loans under the Ohio Mortgage Lending Act and the Ohio Small Loan Act. I guess greed finds a way.

Predatory Lending in Appalachia

Roy lives in a rural area. He needed quick cash for an emergency, so he went to a car title loan company. Roy worked a minimum wage job. Long story to a short story — he defaulted on the loan, lost his vehicle and then lost his job due to lack of transportation. The loan was for far less than the value of Roy’s vehicle.

Martha resides in a small town and receives Social Security Disability Income (SSDI). After struggling to pay off a $500 loan with a high interest rate from a local loan lender, she borrowed $1,000. Her distress increased. “They told me I could refinance my thousand-dollar loan for smaller monthly payments,” she said. I asked, “Did they tell you about the refinance fees, the extension fees, the establishment charge, the compounding of interest and the longer you take to pay off the loan, the more it costs you?” She looked surprised.

Why would a loan company lend money to a person on SSDI? Martha has no job, no car and no land — no assets. I referred her to the state attorney general’s consumer protection division to verify that state paid disability is exempt from garnishment, and I recommended Ohio Legal Aid.

Payday loans exploit the working poor and the desperate. But at least the modern-day loan sharks don’t break kneecaps.

Melissa Martin, Ph.D.

Melissa Martin, Ph.D., is an author, self-syndicated columnist, educator and therapist. She resides in Scioto County, Ohio.

Melissa Martin, Ph.D., is an author, self-syndicated columnist, educator and therapist. She resides in Scioto County, Ohio.