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As expected, some in the so-called payday loan industry have announced they will close a combined 79 stores in Ohio after the passage of a state ballot issue that meant payday loan interest rates were capped at 28 percent.
But several lenders, including those that will close stores, are launching new types of loans that carry origination fees. Others will focus on other services to maintain revenues.
"We all are in the dark because we don't know the viability of these new products we will be offering," said Jeff Kursman, a spokesman for Check 'n' Go, of Cincinnati, which will close 36 of its 71 Ohio stores.
"But what it boils down to is we said there would be job losses and store closings and for those that denied that would be the case, they were wrong."
His company has five Toledo stores. No decision has been made on which stores will close, he added.
Ballot Issue 5, which passed by more than a 2 to 1 ratio, allowed a law to take effect that cuts the annual interest rate payday lenders can charge from an average 391 percent to 28 percent. It also limited the number of loans a customer could take to four per year. It takes effect Nov. 26.
Several such lenders predicted they would close stores and cut 6,000 jobs if the measure passed.
Cash America Inc., of Fort Worth, which operates Cashland stores, plans to close 43 of its 139 Ohio stores. It has seven in the Toledo area. A spokesman said two Toledo stores - at 2034 South Byrne Rd. and 246 East Alexis Rd. - will close by year's end, although the employees will be given jobs at the remaining five stores.
"Initially, we said that all 139 of our stores would be closed but we have been able to save some stores through other means," said Yolanda Walker, a spokesman for Cash America. The lender also operates pawn shops and will focus on that service to counter lost payday-lending revenue, she said.
Cash America, Check 'n' Go, and several other payday loan firms have obtained licenses to offer new types of loans under the Ohio Mortgage Loan Act and the Small Loan Act. The mortgage loan act restricts interest rates to 25 percent with no loan amount limit, but allows an origination fee that would increase the annual percentage rate.
The Small Loan Act allows loans up to $5,000 at a maximum rate of 25 percent on the entire amount, or 28 percent on the first $1,000 and 25 percent on the remainder. It also allows an origination fee of $15 or 1 percent of the loan, whichever is greater, on loans of $500 or less.
Since May, Ohio has received 702 applications from lenders seeking to offer loans under the Small Loan Act.
Advance America, of Spartanburg, S.C., said it plans to offer the loans at all of its 244 Ohio stores. "If, however, Advance America determines that it is unable to implement an economically viable alternative loan product in Ohio, it may close some or all of its centers in Ohio," the company stated. It has eight Toledo-area stores.
Check Into Cash, of Cleveland, Tenn., said it will wait several months to determine how it does financially with loans under the Small Loans Act before closing any stores. It has five Toledo-area stores that began offering the new loans Nov. 5.
Meanwhile, officials at the Center for Responsible Lending, of Washington, D.C., a national consumer advocacy group that supported Issue 5, said it would monitor the new loans.
"We haven't seen yet what products they're planning to offer, but we've seen in other states where they've tried to offer something to get around restrictions," said Chris Kukla, a spokesman.
From a consumer standpoint, Ohio's new payday lending restrictions, which take effect when the state election results are certified, looks pretty airtight, he said. "Everybody now has to play by the same rules."
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