Payday loan businesses across Ohio are suffering after voters approved Issue 5 Nov. 4.
The issue approved HB 545, which decreased the payday loan industry's annual percentage rate from 341 percent to 28 percent.
According to Jeff Kursman, spokesman for Check 'N Go, 36 of Ohio's 71 Check 'N Go stores will close in upcoming months.
HB 545, or the new Short-Term Lender Law, was supported by a decisive 63 percent of voters on Election Day, presenting payday loan distributors-such as Check 'N Go-with cutbacks in both the APR rate and the maximum amount of money that can be borrowed with a single loan.
Before HB 545 was passed, lenders could offer a maximum of $800 with a single loan. Now, state lenders may only grant $500 per loan, and must allow borrowers at least 30 days to pay back the loan.
Kursman said the decision to close the stores was a re-evaluation of their customer base.
"We looked at the overall performance of the stores and determined, quite frankly, where our customers are," Kursman said.
However, while changes are taking place in the industry, supporters of Issue 5 are hesitant to believe the industry will fade.
Susan Acker, spokeswomen for the Ohio Coalition on Homelessness and Housing in Ohio, has been a supporter of Issue 5 since its inception, and said the situation is more complicated than voters have been led to be believe, and said the loan industry is adapting to the changes.
According to Acker, all payday loan businesses label the loans they offer as products. These products are now being changed by the loan industry to skirt the restrictions of HB 545.
"What we do think will happen is the industry will create new products, but they are only a wolf in sheep's clothes," Acker said.
Acker said payday lenders are able to change the provisions of loans so they fit under a different category of Ohio's financial law. Currently, all short-term lenders in the state adhere to laws set forth under the Ohio Check-Cashing Lender Loan Act.
Dennis Ginty, spokesperson for the Ohio Division of Financial Institutions, said many payday lenders have applied to change the license of lending in which they currently operate.
"Of the 1,394 lenders in the state, the Division of Financial Institutions has received applications from 1,149 (lenders)," Ginty said.
Those applying to change their lending license, Ginty said, are moving to operate under the Small Loan Act and the Ohio Mortgage Loan Act.
Under the Small Loan Act, lenders can calculate interest on the loans they issue by charging a maximum of 25 percent on the entire loan, or 28 percent on the first $1,000 and 22 percent on the remainder of the loan up to $5,000.
Under the Ohio Mortgage Loan Act, lenders who make loans secured by real estate or personal property may charge an interest rate of 25 percent with no loan limits.
Both laws allow lenders to charge fees increasing the annual percentage rate.
Regardless, Acker said there was strong support for Issue 5.
"Our lawmakers made it clear that the outrageous interest charges on these loans that are charged to people who can not afford them is unacceptable, and the people who voted agreed," Acker said.
According to Rep. Tom Brinkman (R-34th district), other states have faced the same kind of payday loan restrictions, however these states haven't seen the industry die.
"I think that within a few years this industry will be back in Ohio," Brinkman said.
State Rep. Shawn Webster (R-53rd district), whose district includes portions of Butler County, said there are positive and negative parts to the issue.
"Even though I voted for the issue on the floor, I had some doubts on where things would go," Webster said. "I think all the nickel and dime-ing stuff is wrong and it should be handled consistently."
Webster said if payday lending is restricted in the state, then other areas must also be examined.
"Why do we do what we do to one financial sector, but not do that across the board?" Webster said. "(Payday lending) may be a symptom of the economic problems in our country, but it is only a symptom of a deeper-rooted problem."
