Payday Loans

PAYDAY LOANS

A payday loan (also called a “payday advance” or “short-term loan”) is a small, short-term unsecured loan, regardless of whether repayment is linked to a borrower’s payday.  Legislation regarding payday loans varies widely between different states.  Ohio law protects borrowers from certain types of practices by payday lenders, limits what payday lenders can charge, and what they can do upon the borrower’s failure to repay the loan.

 

Your Rights

Ohio enacted the Short-Term Loan Act (STLA) in 2008.  The STLA is designed to limit the dollar amounts, interest rate, and other fees for a payday loan.  It also restricts what a payday lender can do if you do not repay the loan.

Under the STLA, a payday loan is subject to the following limitations:

your loan agreement must be in writing, using clear and concise terms;
the amount of the loan is capped at $500;
the loan duration cannot be less than 31 days;
repayment can be extended to 60 days, at your option, at no additional fee;
the interest rate is capped at 28% APR; and
collection fees (such as for a NSF check) are capped at $20.

 

Payday Lender’s Duties to You

The STLA requires payday lenders to conduct themselves in a certain way with borrowers.  When you take out a short-term loan, that lender must:

follow all of your reasonable and lawful instructions;

act with reasonable skill, care, and diligence toward you;

and deal with you fairly, and in good faith.

Ohio License Requirement

Payday lenders must be licensed in Ohio.  Furthermore, licensed payday lenders must be physically located in Ohio when extending the loan to you.  The STLA prohibits lenders from giving you a short-term loan over the phone, by mail, or over the internet.  Therefore, if you received a payday loan through an application you submitted over the internet, that lender is breaking Ohio law by simply loaning you the money!!!

* Not including: Advance America, Cashland America, Check ‘N Go, Ace Cash Express, Check-Into-Cash and Rent-A-Center.  These are the only payday lenders licensed in Ohio that also allow online applications.

 

Other Prohibited Payday Lending Practices

In addition to restricting the types of loans that payday lenders make, there are some practices that are totally prohibited under the STLA.  Under the STLA, a payday lender cannot:

charge or collect any additional fees outside of what is allowed under the STLA or other laws concerning civil debt collection lawsuits;

charge you a penalty if you bounce a check;

make more than one loan to you at the same time, if the total amount of all loans is more than $500;

require you to repay loans that total more than 25% of your gross monthly salary;

require you to waive any legal rights with regard to the loan;

renew an existing short-term loan with you;

accept collateral from you as security for the loan, such as title to your car or home;

disguise your payday loan as a sale or lease or cash rebate to avoid its obligations under the STLA;

charge you a penalty for paying off your loan early;

recommend that you borrow more than what you asked for;

make more than four (4) loans to you within a year;

make more than two (2) loans to you within 90 days of each other, unless you first attend an approved financial literacy program;

bill your credit card or electronically draft your bank account;

use false or misleading ads or engage in other deceptive trade practices;

offer you a reward, gift or other incentive to take out multiple loans, or offer you a free or discounted loan in exchange for your future business;

redeposit a previously dishonored check from you unless you consent in writing;

or alter your paper check or submit false information about your check.

communicate with or disclose information about your debt to other persons unless that person is your attorney;

contact you directly if it knows you have an attorney;

use postcards or other mailings that reference a debt;

contact you before 8:00 a.m. or after 9:00 p.m.;

contact you at your place of employment if it has reason to know that your employer does not allow such contact;

continue to contact you after you have notified it in writing to cease communications;

harass, annoy or abuse you by telephone or use obscene or profane language;

misrepresent or lie about the amount, character or legal status of the loan;

misrepresent or lie about attorney involvement on behalf of it;

threaten the use of law enforcement or jail;

threaten to garnish or attach property, or take other legal action when it has no present intent or right to do so;

report false or misleading information about the debt to a credit reporting agency;

use false or misleading letters and other documents to collect the debt; and

solicit checks postdated by more than five (5) days or prematurely deposit postdated checks.

 

Prohibited Payday Lending Collection Practices

In addition to restricting the types of short-term loans that a payday lender can extend to you, the STLA also limits the ways that a lender can collect the debt from you if you fail to repay it.  This part of the law supplements the Fair Debt Collection Practices Act (learn more about the FDCPA here).  The STLA provides more protection than that offered by the FDCPA because it covers debt collection practices by the original lender in addition to the debt collection agency.

Your payday lender (and any debt collector hired to collect on behalf of the lender) cannot:

If the Payday Lender Violates the STLA – Lawsuits and Remedies

You have a private cause of action if a lender or debt collector harms you in violation of the STLA.  This means that you can file a lawsuit in Ohio against the creditor or its debt collector for damages.

If you win, the court may award to you:

cancellation of the loan, if done within a reasonable time after you discover the violation;
or up to three (3) times the amount of your actual damages or $200 (whichever is greater), plus additional damages up to $5000;

punitive damages; and

attorney’s fees and court costs.

The lender or debt collector may also be subject to criminal sanctions, enforceable by the Ohio Attorney General.  If you have a potential claim against a payday lender, you can visit Ohio’s Division of Financial Institutions webpage at www.com.ohio.gov/fiin/stabout.aspx.

You may also have a private right of action for violations of the FDCPA or other federal statutes.

 

Internet Payday Lending Scams

The Federal Trade Commission recently sued several internet-based payday lenders for violating federal laws.  The lenders allegedly lied about how much their loans would cost, required borrowers to allow the lenders to take money from their bank accounts automatically, and threatened to sue the borrowers or have them arrested for non-payment.

Here’s how the scam plays out: internet payday lenders require you to provide bank account information so they can deposit the borrowed funds electronically and withdraw the repayment amount from your account later.  The lenders claim that the repayment amount will be the amount borrowed plus a one-time finance fee, and that this amount will be withdrawn on a particular date.  Instead, lenders make multiple withdrawals from your bank account and assess a new finance fee each time.  When it’s all said and done, you either pay much more than the stated cost of your loan, or your entire bank account is sucked completely dry.

It is at this point when you have no money left in your account to be withdrawn that the abusive and deceptive collection calls begin.  These calls are made from unknown and unregistered 800 numbers, making them nearly impossible to trace.  Calls are made at all times of the day, made repeatedly to your workplace, and the callers may even harass your coworkers about your alleged debts.  The callers use fake names and make other misrepresentations, threaten to take legal action against you, and use aggressive tone and language.

If you have applied for a payday loan over the internet, you may receive fake collection calls.

DO NOT pay any money to these people!!!

 

If you believe you have been victimized by an internet payday loan scam, contact a consumer attorney in your area to learn more about your potential remedies.

 

Payday Loan Lead Generators

Unlike a direct lender which lends you the money, a lead generator is a middleman – a company that collects your personal and financial information through an online loan application and shops it around to lenders who may offer you a loan.  These companies often own, operate and host thousands of websites and associated internet domain names.  But they are not actual lenders.  These lead generators sell the information included in online loan applications, and potential borrowers usually do not even know it.  The online application may ask for your name, address, phone number, date of birth, Social Security number, bank or credit card account number, annual income, employer contact information and more.

Be Aware:  Lead generators will often sell your personal information to unlicensed and illegitimate lenders that cannot be traced or sued!

 

Risks of Sharing Your Personal Information

Be VERY careful about giving out your information.  Whether or not your visit to an online payday loan site results in a loan, simply entering information on the site may come back to haunt you.  Selling personal and financial information is big business.  People who buy your information may use it to try to sell you good and services, charge you for goods and services you didn’t agree to buy or charge amounts other than what you authorized, or try to commit identity theft.  Learn more about identity theft here.

Even if you never hit “Submit” to complete the transaction, your information can be captured through keystroke logging – a program used to see and store everything you enter on application.  Even your mouse clicking around the website can be traced back to you.

Be AwareIf you have applied for a payday loan over the internet, it is highly recommended that you close the bank account that you provided information about in the application, and if you are receiving fake collection calls, you should also consider changing your phone number.

 

Considering Other Options to Payday Loans

1)      Go to a credit union.  Some banks offer short-term loans for small amounts at competitive rates.  A local community-based credit union may make small business loans, as well.  If they do, they usually provide better terms than you would be able to find elsewhere.

2)      Contact your creditor or loan servicer.  If you are having trouble making a payment, you can always ask for more time.  Many of your creditors are willing to work with you if they believe you are acting in good faith.

3)      Plan ahead.  Make a realistic budget, including your monthly and daily expenditures.  Try to avoid unnecessary purchases: the costs of small, everyday items like a cup of coffee add up.  At the same time, try to build some savings: small deposits help.  A savings plan – however modest – can help you avoid borrowing for emergencies.  Saving the fee on a $300 payday loan, for example, can help you create a buffer for financial emergencies.

 4)      Overdraft protection.  Find out if you have – or if your bank will offer you – overdraft protection on your checking account.  If you are using most or all the funds in your account regularly and you make a mistake in your account records, overdraft protection can help protect you from falling further behind.  Find out the terms of the overdraft protection available to you – both what it costs and what it covers.  Some banks even offer “grace periods” that allow you to deposit additional money within a certain time period to avoid any fees for the overdraft.