The term “payday loan” generally refers to small, short-term loans, usually given to poorer people with limited access to traditional credit. They are reimbursed automatically on the next paycheck and often cost hundreds of percentage points annually.
Last month, the Ohio Capital Journal reported how CheckSmart, another payday lender, and affiliates managed to continue offering loans with rising interest rates despite new lending rules. Ohio. The company’s CEO and related political entities have showered lawmakers and Attorney General Dave Yost with campaign contributions.
Similarly, consumer complaints and a recent Court of Appeal decision against NCP Finance describe a continuing cycle of debt, with customers owing far more than they ever borrowed, sometimes against the titles of their vehicles.
NCP Finance is owned by Lee Schear, one of the most prolific Republican donors to Ohio politics. Since 2017, he has paid nearly $47,000 to Yost, whose office has handled most complaints against the company and manages the state’s consumer protection division.
A few examples of the nearly 50 complaints, obtained by public records request, over the past few years: A Dayton woman said in March 2019 that she received a $900 loan funded by ASC on a Cash Max storefront, secured by his vehicle. She repaid the loan, but the loan office closed. She was called by a third party claiming she still owed $3,000. Meanwhile, there is still a lien against his car, preventing him from receiving the title.
A Lorain County woman told the Federal Consumer Financial Protection Bureau in September 2019 that she had repaid $1,700 on a $900 loan funded by NCP. She was then told that she owed an additional $1,000.
A Springfield woman said in a December 2020 complaint filed with Yost’s office that she borrowed about $1,900 in May 2019, secured by her personal vehicle as collateral. She said she paid off the loan, but the storefront has since closed, so she can’t get her car title.
Most of the underlying loans predate the 2018 law, indicating some success with the new policy. However, complaints and related lawsuits have continued, highlighting the persistent problem of the debt trap.
In August, First District Court of Appeals judges sided with the borrowers and questioned the legal legitimacy of some of NCP’s loans, which predate the 2018 law. Judge Pierre Bergeron called the case of lenders using “creative means to try to impose excessive interest rates, often in a game of cat and mouse with the legislator”.
To circumvent state loan laws, Bergeron decided that NCP had instead entered into an “obscure” relationship with SunUp Financial, a “credit service organization” that brokers the loan.
He wrote that SunUp was charging fees that exceeded the loan amount by 200%. So, in addition to the payday loan, borrowers took out more money to pay SunUp’s fees.
“A loan that would otherwise be prohibited to ASC under Ohio law was then (theoretically, at least) possible simply because of its association with SunUp,” Bergeron says. “Left unexplored is the degree to which registrants and brokers work in concert, blurring the line between lawful and not.”
The borrowers in question were being sued by a company that bought up the debts of the lenders to collect them. The court ruling sent three cases back to lower courts to reconsider the claims of borrowers, who challenged the legitimacy of the loans.
A plaintiff in the case funded a total amount of approximately $5,000 with ASC. But court records say she only received $1,750 directly, while another $3,260 went to SunUp to cover CSO fees, which she must repay.
John Rebel, one of the attorneys who sued NCP in the case, said in an interview that the company’s practices were illegal and questioned why state regulators were allowing NCP to continue operating.
He dismissed the idea that the 2018 law had really taken a bite out of the industry. Instead, he said, NCP and others continue to offer loans online and through storefronts under other Ohio laws, while charging between 150% and 200% APR. .
“The state government, in my opinion, was in the pocket of the payday lenders,” he said.
The complex relationships between lenders, credit service agencies, and what are sometimes called “rent-a-banks” (usually based in Utah, whose laws are generally lender-friendly) are rarely explained clearly to customers.
Gutter, the legal aid attorney, said her clients often have low financial literacy. Sometimes they reach out before being sued, sometimes they don’t.
“Our customers have no idea this whole scheme is going on,” she said. “They find out when they think they’ve paid off the loan and then find out they owe double that.”
The OCJ contacted the NCP by phone and email three times last week regarding the consumer complaints and the appeal decision. The company did not respond to inquiries.
Similarly, this media contacted eight borrowers, none of whom responded. Their names have been withheld to respect their privacy.
Rebel said Ohio’s Financial Institutions Division should crack down on NCP and other payday lenders. Mikaela Hunt, a spokeswoman for ODFI, said the office is “aware of the products on offer” but cannot, by law, comment on investigations.
“DFI is able to refer complaints and investigations to the (Attorney General’s office) for enforcement or conduct our own investigation,” she said. “Depending on a company’s license and the specific law at issue, the IFD has the authority to impose civil penalties, issue cease-and-desist orders, and suspend or revoke the licensing a business through the administrative hearing process.”
Yost’s office provided the consumer complaints against ASC in response to a public records request. However, a spokeswoman did not respond to inquiries about NCP’s lending practices, Yost’s app, or the company’s CEO contributions to Yost’s campaign.
Rep. Kyle Koehler, a Springfield Republican who sponsored the 2018 law, previously wrote a letter to Yost urging him to investigate the business practices of CheckSmart, another payday lender. He reviewed the NCP’s complaints upon request, noting that many related to loans that predated the new law’s effective date.
“But they explain exactly why we needed this law,” he said in a text message. “We are looking into this…”