Consumer Car Buying Advice Blog

Yesterday the Ohio Senate passed legislation that would cap the annual interest rates on payday loans at 28%. Currently, these lenders are able to charge rates that typically exceed 300%.

Bill should become law later this month

It is almost certain that Ohio governor Ted Strickland will sign House Bill 545 by the end of the month. In doing so, he will give the State of Ohio one of the strictest payday lending laws in the U.S. Currently, payday lenders in Ohio are allowed to charge $15 for every $100 borrowed for two weeks. If borrowers are unable to pay the amount back at that time, they can “roll over” the loan for an additional $15 per $100 borrowed. If it takes them a year to pay it back, the borrower would end up paying $1170 in fees – equivalent to 390% APR.

According to the Ohio Coalition for Responsible Lending (OCRL), while payday lenders market their loans as short-term solutions for people in dire need of funds, data from a recent study shows that only 1% of borrowers pay their initial loan off during the first 2-week cycle. In Ohio, alone, the number of payday loan shops skyrocketed from 107 in 1996 to 1,562 as of this writing – an amount, according to the coalition, that exceeds the combined number of McDonalds, Burger King and Wendy’s restaurants in the state.

“This is one of the greatest days in recent years for Ohio consumers,” said Tom Allio, chairman of OCRL. “Our coalition has worked three hard years, and we finally find ourselves on the doorsteps of a bill-signing ceremony at the Statehouse.”

The Bottom Line

Here at Auto Credit Express, we support fair lending practices. We believe that a bad credit car loan can help many people reestablish their credit. We also believe, however, that borrowers need to enter into a subprime car loan only after they thoroughly understand the process. That’s why our web site contains a resource center. It’s also why we list our toll free number at the bottom of every page. That way, if you have any additional questions, you can call us during business hours and talk to a customer service representative that has experience in special finance lending.

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