Email of the day
July 29, 2008 | Ohio, industry, regulation | Comments (0)From Chris, an Ohio payday lender:
In response to alternative small loans available in Ohio. I visited a bank yesterday who does offer smaller short term loans. They are not licensed under the small loan act, so the fees they charge to offer the smaller loans are not restricted by the small loan act. First, they charge a large loan origination fee, $159. Their interest rate is 18%, not 18%APR. In the example I was shown, a $1500, 90 day loan, actually has an APR of over 60%, with the bank grossing just under $400 for the transaction. Should the borrow not be able to repay at the end of the 90 days, the loan can be re-written for another $159, plus another 18% interest. If you use the same logic as is used to calculate the payday loans APR, at the end of the year, the original $1500 loan re-written 4 times the 60% APR = 240%APR. Those of us in the payday business have been incouraged to switch to the small loan license. But as it is written we still can’t compete because of altra low loan origination fees ($15-$30) and a cap of 28% APR, not 28% interest. I don’t mind being the underdog, but the playing field is simply not level.
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