12 November, 2008

The payday loan industry has lost a ballot fight to overturn difficult restrictions on the interest rates, which charges on customers is searching for other ways to do business in Ohio as consumer advocates concern about lenders as they are hunting a way around the election results.

Lenders are concentrating more on services such as pawn brokering and purchasing gold, and some are seeking for licenses under other Ohio loan laws.

Consumer advocates plan to take a close look at what lenders are doing. Ohio's new law reductions in the interest rate that payday loan lenders can charge from an average 391 percent annual rate to 28 percent and limits the number of loans customers can take to four per year. It is among the strictest laws in the country.

According to Uriah King, policy associate for the Center for Responsible Lending that lobbies against payday lending, "Whenever states discard payday loan lenders, they try to hunt other ways to keep trapped customers coming back to their stores to keep generating the same fee income off of them,: said Uriah King, policy associate for the Center for Responsible Lending that lobbies against lending payday loan.

The Small Loan Act governs non-depository lenders who make loans up to $5,000 not secured by liens against real estate. Lenders can calculate interest by charging a maximum 25 percent on the whole loan amount or 28 percent on the first $1,000 and 22 percent on the remainder of the loan up to $5,000.

The Ohio Mortgage Loan Act ruled over the lenders who make unsecured loans and loans protected by real estate or other personal property. The maximum rate is 25 percent with no loan amount limit.