Canton, Ohio, is a nexus of the payday lending industry, The New York Times reported on Friday. At one such business, a consumer stopped in to do his biweekly banking: Nearly every payday, he cashes his check, pays off his last loan in full and takes out a new one against his next paycheck. The amount he borrows varies, but it is typically around $500, for which he pays a fee of $73 — a 380 percent annual interest rate. However, federal regulators view these businesses as part of a predatory industry that is ripe for reform and a crackdown. The Consumer Financial Protection Bureau is poised to adopt strict new national rules that will curtail payday lending. This will limit the number of loans that can be taken in quick succession and will force companies like Advance America to check that their borrowers have the means to repay them. But lenders — and even some consumer advocates who favor stronger regulation — are grappling with the uncomfortable question of what will happen to customers if a financial lifeline that they rely on is cut off. Ohio has some of the highest per-capita payday loan use in the nation and the rates that its lenders charge are also among the highest. At least 14 states have banned high-interest payday lending, and for a time, it looked as if Ohio would join them. In a 2008 referendum, voters overwhelmingly backed a law limiting interest rates. But lenders found loopholes, and their loan volume grew: To skirt the rate caps, payday lenders register as mortgage lenders or as credit service organizations, which are allowed to charge fees for finding loans for their customers.
