COLUMBUS, Ohio (WOWO/Ohio News Service) – Federal measures to rein in the payday lending industry are being met with cautious optimism in Ohio.
It’s the first time the Consumer Financial Protection Bureau has proposed rules to regulate the small-dollar loan industry, which charges interest rates of more than 300 percent in some cases.
Bill Faith, executive director for the Coalition on Homelessness and Housing in Ohio, says under the new rules, lenders would have to verify a customer’s income to confirm their ability to repay a loan.
But he explains there are some loopholes lenders can claim that their ability to collect payment from a customer in the past meets the ability-to-repay requirement for future loans.
“The payday lender still would be able to do six loans without even having to look at the borrower’s ability to repay,” says Faith. “No underwriting to make sure the consumer could afford the loan. We should look at the borrower’s ability to repay for every loan, make sure they’re not getting overextended or into trouble.”
The payday lending industry maintains the proposed rules would be a blow to consumers, by limiting credit for those who use payday loans to cover unexpected expenses or a budget shortfall.
An estimated 12 million Americans a year borrow from payday lenders.