The term loan shark may bring to mind an unsavory character on a street corner or in a dark alley that you seek in desperation. The Term payday lender conjures up a legitimate business in a storefront in your hometown. Yet are these two things the same thing? Well, sort of.
A loan shark typically required very high rates of interest for the short-term loan that they offered in your desperation. If you did not repay they are rumored to have used draconian methods to ensure repayment. In the case of payday lenders, prior to the Ohio House of Representatives passing yet another law to attempt to curtail the damage done by these lenders, these businesses could charge up to 400% annual interest. Often those who received the loans from a payday lender were unable to repay the loan at the next payday and pay all their other obligations, so the loans turned into revolving loans at incredible interest rates. Not unlike the practices of a loan shark.
In the case of a payday lender, instead of showing up at the office of the employee demanding payment “or else”, these businesses take checks that are post-dated or make automatic withdrawals from the bank accounts of the borrower. These practices often overdraft the account of the borrower resulting in unpaid bills and high bank service charges. In addition to incredible interest rates now the borrower in indebted to the bank and their other creditors. It is nearly impossible for a typical payday borrower to get out of the cycle of borrowing and they often seek more and more of these loans to make ends meet.
In the 1970 and 1980’s the FBI cracked down on the loan sharks and worked to put them out of business. On June 7, 2018, the Ohio House of Representatives passed yet another law to attempt to stop the exorbitant interest rates charged by these Payday lenders. The prior law passed by the Ohio Congress did not close every loophole to the high-interest rates charged by these businesses. This new law hopes to close the loopholes and ensure that the interest rates charged are not completely crippling to the borrower. There will always be a need for short-term loans for people desperate to make needs meet, but the era of draconian interest rates may finally be over for Ohioans. Just like the loan sharks were curtailed so, hopefully, will be those who have preyed on the desperate through payday lending at nearly 400% interest annually.
If you have been caught in the cycle of debt of payday loans you cannot ever hope to pay off bankruptcy is an option. Moseman Law Office, LLC can help. Contact us to discuss your options.
Adapted from the Plain Dealer Article in Section B page 4 of the June 10, 2018 edition.