The payday lending industry responds to recent media coverage in Ohio. Statement from CFSA:

Due to a prohibitive annual rate cap, payday loans are no longer available in Ohio, yet consumer demand for short-term, small-dollar loans remains.  While dozens of lenders closed their doors upon passage of the annual rate cap, other lenders, instead of laying off employees and turning customers away,  began offering different credit products and services- all well within the Ohio lending laws.

In fact, during the legislative debate concerning payday lending last May, lenders were urged to apply for licenses to operate under Ohio’s Small Loan or Mortgage Loan Act and encouraged to come up with new credit products to service the growing consumer demand for short-term, small-dollar loans.  This is exactly what lenders are doing- operating under the Small Loan or the Mortgage Loan Act, both which have been part of Ohio law for thirty years.

The data published in the report by the Housing Research and Advocacy Center on credit products being offered in Ohio is based on hypotheticals. They looked at what $100 could cost under Ohio’s various loan acts, not what lenders are actually charging and what consumers are actually paying. They also look only at the number of licenses, not the number of actual stores, creating a misleading picture, as some lenders have multiple licenses and others have licenses that they do not use. Additionally, with the average loan in Ohio being $385, the examples cited in the report are deliberately disingenuous.

The bottom line is that there remains a strong consumer demand for short-term credit. A small loan is sometimes the only option for a consumer. At other times, it is the cheapest one – particularly compared to the high costs of bank and credit card fees. While banks and credit unions are already being encouraged to offer short-term loans, in the current economic environment there is an extreme reluctance to make uncollateralized, small-dollar loans.