Some Web payday lenders yanking money back-From Ohioians

From the Columbus Dispatch

Consumer 10 Report
Some Web payday lenders yanking money back
Sunday, September 28, 2008 3:45 AM
By Paul Aker
WBNS-10TV
Some Internet-based payday lenders are calling in Ohioans' loans, citing a new state law that they contend leaves them no other option.

In recent weeks, Ohio's attorney general has received several complaints from borrowers who said lenders withdrew full loan balances from their bank accounts well before the loans were to be repaid. Most of the borrowers said the lenders blamed restrictions placed on them by House Bill 545, a payday-loan crackdown passed this year by the General Assembly.

The legislation has generated countless headlines and fiery debates, but much of the attention has focused on provisions that slash the allowable annual interest rate to 28 percent (from 391 percent), prohibit loan terms of less than 31 days and limit borrowers to four payday loans per year.

However, the new law also seeks to prevent Internet-based lenders from operating in Ohio. Specifically, it requires lenders to obtain a license from the Ohio Department of Commerce and stipulates that "no licensee shall make, offer, or broker a loan ... when the borrower is not physically present in the licensee's business location."

In the past, a number of Internet-based lenders, including some of those cited in the complaints, haven't obtained licenses and, as a result, have effectively operated outside the state's purview. Nadine Ballard, chief of the consumer-protection division of the attorney general's office, said some of these companies' customers have complained of annual interest rates as high as 782 percent.

Although the new law clearly aims to ban online payday loans in Ohio, there's confusion surrounding the decision of some Internet-based lenders to close out existing loans.

Here's why: Although the law took effect Sept. 1, a good deal of it is essentially on hold, pending a possible repeal referendum in November.

Even if the provision banning Internet-based payday lenders is deemed to be in force, would it apply to existing loans? In other words, were the affected lenders allowed to -- or obligated to -- violate their contracts with borrowers? Or were they just using House Bill 545 as an excuse to get their money early?

The lenders contacted by WBNS-TV (Channel 10) declined to discuss the matter, saying they would deal only with customers.

The lenders' motivation doesn't really matter to Ken, a 43-year-old Coshocton man who asked that his last name not be used because he's embarrassed by his predicament.

This summer, according to a complaint he filed with the attorney general, he borrowed $400 from 500FastCash.com, which doesn't appear on the state's list of licensed lenders.

He said the original terms called for him to repay the loan amount, plus interest, in biweekly installments of $50, with the final payment to be made at the end of October. A few weeks ago, however, he learned that the entire loan balance would be taken out of his account on Sept. 11. The stated reason: House Bill 545.

"My budget was set on what the contract said," he said.

Ballard said Ohioans who've had similar problems should visit www.AG4Ohio.gov.

[email]paul.aker@10tv.com[/email]