Payday lenders, pawn shops, car title loans, and rent-to-own stores. For-profit businesses that feed off the desperation of people in financial crisis. How many of these greedy companies are in your city and county?
Let me make this clear: profit is not a dirty word. America is a democratic society based on capitalism. Uncapped interest rates and fees on top on fees on top of fees are the dirty practices.
According to the Business Dictionary, for-profit is defined as “A business or other organization whose primary goal is making money (a profit), as opposed to a non profit organization which focuses a goal such as helping the community and is concerned with money only as much as necessary to keep the organization operating.”
Nonetheless, a predatory business must have prey to stay profitable. And consumers are the prey. A lion prowls around seeking a sign of weakness in a gazelle—then pounces. But, lurking lenders are savvier—they dress up in sheep’s clothing to lure cash-strapped consumers into their debt trap. Gotcha!
Unfortunately, customers are turning to these high-interest alternatives. Default on a lender loan and a multitude of fees appear from the small print on the signed contract. The cost of quick cash and convenience is staggering and stunning. Just google and read the surveys and studies.
A payday loan (aka, small dollar loan, payday advance, salary loan, payroll loan, or cash advance loan) is supposed to be a short-term loan.
“But we are only to be used for the occasionally financial emergency,” declare the loan lenders. That’s how the owners and managers justify business. “We care about people. That’s why were here.” Really? How much do you care when you repossess an individual’s vehicle? Or resell a pawned diamond engagement ring? Or take back furniture and appliances?
The Wall Street Journal reports that the average consumer of a payday lender makes 11 transactions a year. But, there are new regulations. “The rule from the Consumer Financial Protection Bureau requires payday lenders to assess whether borrowers can repay the loans and limits rollovers, where customers take out new loans to repay old ones—a practice that often leads to snowballing fees,” according to a 2017 article. www.wsj.com/. Legislation regarding payday loans varies depending on where you reside.
It’s a sad fact in the USA—federal and state government agencies have to step in and make unscrupulous companies play fair. “Follow the money trail”—a popular phrase used by journalists and reporters. Where does the trail of green greed end?
Yes, unexpected things in life happen. How can a legitimate business offer quick loans to Americans with poor credit histories, while still making a fair profit—without gauging consumers?
Ohio Payday Lenders
A payday loan is a short-term loan based on a post-dated check in anticipation of a person’s next pay period. An origination fee and interest are added to the cost of a loan. Policy Matters Ohio visited and called 69 payday loan stores in Ohio to explore payday loan costs, terms, and conditions. Read the 2009 report at www.policymattersohio.org/.
In 2018, Gov. John Kasich signed House Bill 123: The Fairness in Lending Act, a bill to save Ohio consumers millions in payday loan interest rates and fees. Notice the word “fairness.”
Ohio Pawn Shops
According to several websites, pawn shop loans are less risky than payday, title or cash advance loans. However, people in a credit crunch or separated from employment will lose their stuff at a fraction of its worth if not reclaimed. And regulations vary from state to state.
Ohio pawn shops are licensed and regulated by the Department of Commerce’s Division of Financial Institutions. Visit www.com.ohio.gov. Peruse the Ohio Pawnbroker Act (Chapter 4727). Interest charges (4727.06): No pawnbroker shall charge, receive, or demand interest for any loan in excess of six per cent per month or fraction of a month on the unpaid principal. Interest shall be computed on a monthly basis on the amount of the principal remaining unpaid on the first day of the month and shall not be compounded. www.codes.ohio.gov/orc/4727.
Car Title Loans in Ohio
A car title loan is a small, short-term, high-rate loan that uses the clear title on your vehicle as collateral. The amount you can borrow is based on the value of your car or the equity you have in the vehicle.
“The Federal Trade Commission (FTC), the nation’s consumer protection agency, advises you to put on the brakes and understand the costs of a car title loan. You may want to consider other options. A car title loan will put your car at risk: you may lose one of your most valuable possessions and your transportation.” www.consumer.ftc.gov/articles/0514-car-title-loans.
The typical borrower often pays more than a 300 percent annual percentage rate, according to a joint study by the Center for Responsible Lending and the Consumer Federation of America.
In addition to high interest, car title loans usually include a number of fees: processing fees, document fees, late fees, origination fees, and lien fees. I’m surprised there’s not a fee for putting a fee on multiple fees!
Rent-To-Own Stores in Ohio
Ohio is home to around 140 Rent-A-Center stores, the third highest in the nation based on a 2017 report from FOX 8 News. “Nearly 200 consumers have complained to then Ohio Attorney General Mike DeWine about Rent-A-Center in the past five years.” www.fox8live.com/.
David Rothstein investigated the rent to own industry in Ohio in 2009 for Policy Matters Ohio, a consumer advocacy group. www.policymattersohio.org.
If you believe you have been treated unfairly in a consumer transaction, file a complaint with the Ohio Attorney General’s Office at www.OhioAttorneyGeneral.gov or 800-282-0515.
Should predatory payday lenders, pawn shops, car title loans, and rent-to-own stores be allowed to operate in Ohio? What do you think?
Reach:Melissa Martin, Ph.D, is an author, columnist, educator, and therapist. She lives in Scioto County. www.melissamartinchildrensauthor.com. Contact her at [email protected]