COVID-19 has more Ohioans taking short-term loans
CLEVELAND – Local consumer groups are warning that the additional financial stress caused by the COVID-19 pandemic is causing more consumers to take out short-term or higher-interest payday loans.
Policy Matters Ohio and the Cleveland Better Business Bureau have both urged consumers to do their homework and make sure they fully understand all of the loan terms before signing up.
Kalitha Williams, director of the Ohio Policy Matters Asset Building project, said payday loan reform is needed in Ohio to better protect vulnerable consumers who take out short-term loans to address financial difficulties in the country. COVID-19.
The group published a report highlighting the need for a more specific 36% interest rate cap, which includes the increasing fees it says have been imposed on consumers over the past two years.
The report used data from the Ohio Department of Commerce which indicated that some short-term lending institutions increased loan origination fees by 180% from 2018 to 2019, in an attempt to bypass the rate cap. current state interest of 28%, established in 2008.
The report used data showing that the additional fees raised interest rates on some short-term loans to well beyond 100%, leaving some consumers in long-term debt.
“People who turn to these temporary loan products shouldn’t find themselves in insurmountable debt,” Williams said.
“When we have triple-digit interest rates, it helps keep borrowers in a long-term debt cycle,” Williams said. “A lot of these short-term loans have check cashing fees, monthly maintenance fees, and origination fees.”
“We are asking for an interest rate cap of 36%, including all costs,” she said.
“These fees have very little or no benefit to consumers, their sole purpose is to increase the cost of loans to increase the profits of installment lenders.”
South Euclid resident Anita Woolfolk took out a short-term loan against her SUV in March 2019, just a month before Ohio suspended title loans.
Woolfolk warned consumers to read and understand all loan documents before accepting a short-term loan.
“I was in a bind so I thought it would be a good thing to do to make some quick money,” Woolfolk said.
“I ended up getting around $ 1,300, and I ended up supposedly preparing to pay back $ 4,000.”
“I had to tell my sons I could lose my car, I could lose my truck, and they’re like what you did mom.”
“What they did was legal, but I would tell anyone not to do it. You will end up being so stressed out.
WoolFolk turned to the Cleveland Legal Aid Society, which helped her significantly reduce the amount she owed the lender.
Sue McConnell, president of the Greater Cleveland Better Business Bureau, said consumers should check with the Ohio Department of Commerce to see if the lender they are considering is registered with the state of Ohio.
McConnell said that if consumers are considering an online lender, they shouldn’t give out personal information or money for the upfront fee until they check with the Better Business Bureau to make sure it’s a legitimate business.
“It’s very important that you understand what this loan is costing you, what the terms are, how long do you have to pay it off, what the interest rate is,” McConnell said.
“They are not allowed to lend money in Ohio as a payday lender unless they are physically located in Ohio, and they must be licensed in Ohio, even if they are not. not located in Ohio.
“We spoke to consumers who have borrowed money from friends and relatives to pay the upfront fees, to get a loan that turns out to be non-existent.”