Payday Lenders Use Loopholes to Continue High-Interest Loans

Iowa Independent  
February 2, 2010
Kane, Mary

Despite several states passing laws to regulate payday loans, players in the industry continue to charge high interest rates and fees in some states by taking advantage of loopholes. They are charging check cashing fees and credit investigations fees -- although they never conduct a credit check -- obtaining different lending licenses or, in some cases, changing the amount they lend in order to circumvent state laws. Policy Matters Ohio researcher David Rothstein says some payday lenders in his state have stopped writing loans under $500, given that double origination fees are permitted on loans over that amount under state small loan laws. According to Center for Responsible Lending senior policy associate Uriah King, "In Ohio, New Mexico, Illinois, and Virginia, every major payday lender is violating the intent of the law. I've been involved in public policy issues for a long time, and I've never seen anything like this. It is kind of astonishing. The more I look into it, the more brazen the practices are. Payday lenders, as a trade association, have consistently circumvented the intent of legislative efforts to address their practices." Lawmakers and attorneys general in some states, such as North Carolina and Pennsylvania, have revisited payday lending laws to eliminate loopholes or enhance enforcement efforts; while other states, like Ohio, appear to be starting over and debating the merits of payday lending.

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